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Investors who value dividend growth know they can bank on the big banks to regularly hike their quarterly payouts.

But a look at dividend growth trends in the S&P/TSX 60 index of big blue chips shows the big banks are decidedly mid-pack. According to Globeinvestor, National Bank of Canada has increased its dividend by an annualized 9.4 per cent over the past five years. The other Big Six banks range from 8.9 per cent to 5.2 per cent, which compares well to the latest inflation rate of 4.3 per cent.

But you can do a lot better than the banks if you’re interested in stocks that have grown their dividends impressively in the past five years. Gold, metals and energy stocks have been the biggest dividend growers over this period, but let’s set them aside because of their cyclicality. If commodity prices dip, expect to see resource companies trim their dividends.

Here are 13 bank-beating dividend growers in non-resource sectors, with data to the end of April:

-CCL Industries B (CCL-B-T): A five-year dividend growth rate of 22.7 per cent and a recent dividend yield of 1.7 per cent.

-Restaurant Brands International Inc. (QSR-T): Five-year dividend growth of 22.6 per cent and a recent yield of 3.2 per cent.

-Alimentation Couche-Tard Inc. (ATD-T): Dividend growth of 19.9 per cent and a recent yield of 0.8 per cent.

-Canadian Tire Corp. A (CTC-A-T): Dividend growth of 17.6 per cent and a yield of 3.8 per cent.

-Waste Connections Inc. (WCN-T): Dividend growth of 13.6 per cent and a yield of 0.7 per cent.

-Open Text Corp. (OTEX-T): Dividend growth of 13.1 per cent and a yield of 2.6 per cent.

-Gildan Activewear (GIL-T): Dividend growth of 12.6 per cent and a yield of 2.3 per cent.

-Canadian National Railway Co. (CNR-T): Dividend growth of 12.2 per cent and a yield of 1.96 per cent.

-Canadian Pacific Railway Ltd. (CP-T): Dividend growth of 11.7 per cent and a yield of 0.7 per cent.

-Metro Inc. (MRU-T): Dividend growth of 11.4 per cent and a yield of 1.6 per cent.

-Magna International (MG-T): Dividend growth of 10.4 per cent and a yield of 3.6 per cent.

-Manulife Financial (MFC-T): Dividend growth of 10 per cent and a yield of 5.7 per cent.

-Sun Life Financial (SLF-T): Dividend growth of 9.6 per cent and a yield of 4.4 per cent.

Notice how the elite dividend growers on this list have comparatively low yields. For a mix of strong dividend growth over the past five years and a decent yield, Restaurant Brands, Canadian Tire, Magna, Manulife and Sun Life stand out.

-- Rob Carrick, personal finance columnist

This is the Globe Investor newsletter, published three times each week. If someone has forwarded this e-mail newsletter to you or you’re reading this on the web, you can sign up for the newsletter and others on our newsletter signup page.

Stocks to ponder

Kinaxis Inc. (KXS-T) Year-to-date, the share price of the software provider is up over 22 per cent, making it the 33rd-best performing stock out of 232 stocks in the S&P/TSX composite index. But as Jennifer Dowty tells us, near-term momentum in the share price may be contained. This year is anticipated to be a transition year for the company, with management forecasting its earnings before interest, taxes, depreciation and amortization margin to decline before recovering in 2024.

The Rundown

Recession worries simmer beneath U.S. stock market rally

The S&P 500 is up 8.6% for the year after gaining 1.5% in April, thanks to roaring year-to-date rallies in shares of Microsoft, Amazon and Google-parent Alphabet and other growth and technology stocks that command heavy weightings in broader indexes. Beneath the surface, however, areas of the market tied to economic sentiment such as transports, semiconductors and small-cap stocks dropped in April, while so-called defensive sectors are outperforming. For some investors, it’s a worrying sign.

Also see: Bond investors fearing recession, boost safety bets ahead of Fed

Dividend Monster portfolio falters after last May’s all-time high

The Dividend Monster picks stocks by starting with the largest 300 on the Toronto Stock Exchange. It scoops out the dividend payers and keeps the half of them with the highest yields. The high-yield stocks are tested for momentum, and equal amounts of the 10 with the highest returns over the prior year are put into the portfolio, which is rebalanced monthly. The long-term results are impressive: the portfolio gained an average of 14.9 per cent annually from the end of 1999 through to the end of March, 2023. In comparison, the S&P/TSX Composite Index, gained an average of 6.6 per cent annually over the same period. Norman Rothery updates us on how the strategy is performing of late. (All of his portfolios for dividend and value investors to watch can be found here.)

Betting on a rebound in U.S. regional bank stocks comes with big risks

The outlook for U.S. regional bank stocks took a dismal turn this week when the share price of First Republic Bank plummeted and dragged down other small lenders, suggesting the crisis that has ensnared the sector over the past month may not be over. Still tempted by cheap stocks? As David Berman tells us, rebounds are certainly possible, but smaller lenders are facing tougher regulatory scrutiny that will likely weigh on the sector.

Why you, too, should be fascinated by gold

Some people are passionately attracted to gold. Not Ian McGugan. He’s never seen much of a case for owning an asset that pays no dividend or yield. But, that being said, he will admit to being fascinated by gold right now. Even if you’re as allergic to bullion as he is, Ian explains that it’s worth paying attention to what is happening to the metal because of what it says about the state of market psychology.

This Globe Investing Club member draws his stock-inspiration from honeybees

In March, we invited readers to submit the names of three stocks that they believe would be strong performers over the coming year. This is the first in a series where Globe Investing Club members share their picks.

Others (for subscribers)

Gordon Pape: My Balanced Portfolio is rebounding and attractive again

Monday’s analyst upgrades and downgrades

Chinese small-cap stocks surge in meme-like rally

Globe Advisor

How fund managers have turned bullish on Chinese stocks over the short term

Are you a financial advisor? Register for Globe Advisor (www.globeadvisor.com) for free daily and weekly newsletters, in-depth industry coverage and analysis, and access to ProStation - a powerful tool to help you manage your clients’’ portfolios.

Ask Globe Investor

Question: With all the talk about bank failures and investor insurance, I’m hoping you can clarify a question my wife and I have. From what we understand, if the bank whose discount brokerage we use were to fail, we’d have some coverage because our stocks are insured, up to a point, through the Canadian Investor Protection Fund (CIPF).

But we can’t figure out why this insurance is even necessary. In theory, the bank/broker is acting only as an administrator or custodian for securities or cash that we own. If the securities and cash belong to us – and are not the bank’s property – they should not be affected by a bankruptcy of the bank or broker, correct?

So, if that is the case, in what scenario(s) would a customer’s securities or cash be lost and require the CIPF to make the customer whole?

Answer: In the event that one of its member firms becomes insolvent, the CIPF covers property – including cash, securities, futures contracts and segregated insurance funds – that were held on your behalf but which were not returned to you. The CIPF covers up to $1-million for all cash, margin and tax-free savings accounts combined, $1-million for all registered retirement accounts combined and $1-million for all registered education savings plans combined.

To minimize the risk of customers’ property being lost or unaccounted for when a broker becomes insolvent, the New Self-Regulatory Organization of Canada (New SRO) requires investment dealers to segregate clients’ securities from the firm’s own assets, Ilana Singer, vice-president and corporate secretary with CIPF, said in an e-mail.

“However, segregation is not required for all client property. For example, investment dealers are generally permitted to use the cash in the clients’ accounts. Therefore, there may still be some client property missing, even with segregation rules,” Ms. Singer said. “Another example of where missing property could arise is in the case of a failure by an investment dealer to follow the segregation rules.”

(New SRO is the temporary name of the organization created by the recent amalgamation of the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association of Canada (MFDA). As part of that process, the MFDA Investor Protection Fund and Canadian Investor Protection Fund merged under the CIPF name.)

I wouldn’t lose sleep over any of this, for a couple of reasons. First, it’s rare for an investment dealer to go bust. In the 25 years through 2022, there were just eight CIPF member insolvencies. Second, even if a firm were to become insolvent, the odds of any customer being out more than $1-million are extremely small. In those eight previous cases, the combined payout in aggregate to all customers of the insolvent firms averaged just $2.27-million. Individual payouts to customers would have been a small fraction of that, and certainly well below the $1-million limit.

--John Heinzl (E-mail your questions to jheinzl@globeandmail.com)

What’s up in the days ahead

Rob Carrick takes a look at the interest rates the big banks are offering in their “high interest” and “premium” savings accounts. Let’s just say they’re a little disappointing.

Click here to see the Globe Investor earnings and economic news calendar.

More Globe Investor coverage

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Compiled by Globe Investor Staff

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