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investor clinic

Is there a website where I can look up annual dividend increases of Canadian companies? For retirement planning purposes, what sort of annual percentage increase do you look for?

If you want a quick and dirty way to find stocks with growing dividends, check out the iShares S&P/TSX Canadian Dividend Aristocrats Index ETF (CDZ). You can find the exchange-traded fund’s website with a google search, then click on “holdings” to see a list of its 83 stocks. CDZ holds most of the usual dividend growth suspects – including banks, pipelines, power producers, telecoms, utilities and real estate investment trusts – and some lesser-known names as well.

Stocks in CDZ have raised their dividends for at least five consecutive years, but the ETF’s website doesn’t provide the annual percentage increases. To get that information, you could create a watchlist of stocks on and then use the drop-down menu to choose the “dividends” view. You’ll generate a table with a column that shows the five-year annualized dividend growth rate.

When looking up dividends or any other information, I strongly recommend that you also visit the investor relations section of the company’s website. Most companies provide a detailed dividend history so you can verify how frequently – and by how much – the dividend has grown over the years.

As for what sort of annual increase I look for, my favourite stocks are ones that offer the best of both worlds – a high initial yield and a strong dividend growth rate. One example is TransCanada Corp. (TRP), which yields about 5.2 per cent and targets annual dividend growth of 8 per cent to 10 per cent annually through 2021. In line with its forecast, the pipeline and power company hiked its dividend by 8.7 per cent this week.

Some stocks offer a higher initial yield, but modest future dividend growth potential. Many real estate investment trusts and restaurant royalty funds, for example, yield more than 6 per cent, but distribution growth is typically in the low single-digits. So, you get more income now but less growth later, which appeals to investors seeking immediate cash flow.

Just as you should diversify your portfolio across companies and industries, diversifying by yield and dividend growth rate can help you meet your goals and control your investing risk. Check out my model Yield Hog Dividend Growth Portfolio for more dividend stock ideas. Remember to do your own due diligence before investing in any security.

I have Bank of Nova Scotia shares in a regular taxable account and in a taxable dividend reinvestment plan. I also own BNS in a tax-free savings account. For the purpose of calculating my adjusted cost base (ACB), would the ACB of my taxable shares have to be recalculated to include the costs in the TFSA?

No. The cost of shares held in a registered account – whether it’s a TFSA, registered retirement savings plan or any other registered account – is irrelevant for tax purposes. That’s because there are no capital gains taxes when you sell a security in a registered account. You should therefore leave the TFSA shares out of your adjusted cost base calculation. Since you hold BNS in a taxable investing account and a taxable DRIP, you would need to calculate your ACB across both of these accounts – not for each account separately. For example, if you hold 100 BNS shares in your investing account with an average cost of $40 and another 200 shares in your DRIP with an average cost of $50, your total cost would be $14,000 ($4,000 plus $10,000) and your average cost overall would be $46.67 a share ($14,000 divided by 300 shares). If you sell any shares – whether from the investing account or the DRIP – you would use this average cost figure to calculate your capital gain.

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