Stocks that are dividend growth champions typically have a fan base of investors that helps keep the share price on the rise.
But there are exceptions from time to time that could present a buying opportunity. Let’s see if we can find some dividend growers with weak share prices among the stocks in the S&P/TSX 60 index of big blue chips with the highest five-year dividend growth rate.
A quick example of how dividend growth helps feed share price growth: Open Text Corp.’s (OTEX-T) five-year dividend growth rate is 48.8 per cent and its five-year cumulative share price gain is 88.4 per cent. But there are several stocks with high dividend growth rates and disappointing returns on the shares. Here are some examples:
- Canadian Natural Resources Ltd. (CNQ-T): The five-year dividend growth rate was 18.4 per cent, while the five-year loss came to 27.4 per cent. The past year has been a tough one, with a loss of 31.4 per cent.
- Enbridge Inc. (ENB-T): Five-year dividend growth of 16.3 per cent and a five-year loss of 17.6 per cent. The shares are down a bit less than 3 per cent in the past year.
- Suncor Energy Inc. (SU-T): The dividend is up 14.5 per cent over the past five years, while the shares fell 11.9 per cent. The 12-month loss is almost 30 per cent.
- Bank of Nova Scotia (BNS-T): Five-year dividend growth comes in at 6.5 per cent, while the one- and five-year share price losses are 8.1 per cent and 1.5 per cent, respectively.
Another potential bargain for dividend growth hunters is Canadian Tire Corp. (CTC.A-T), which has produced five-year dividend growth of 20.8 per cent and a one-year loss of 19 per cent. The shares are up almost 33 per cent over the past five years, however.
-- Rob Carrick
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Stocks to ponder
Boyd Group Income Fund This is a security that has provided long-term investors with strong gains year after year as management continues to successfully execute its growth strategy. Consequently, analysts have been raising their target prices and there are currently 11 buy recommendations on the security. Jennifer Dowty profiles the stock.
First National Financial Corp. With the current market volatility, this is a stock to watch given its strong fundamentals, attractive dividend yield of 5.7 per cent, and history of providing special dividends. Jennifer Dowty profiles the stock.
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Ask Globe Investor
Question: I have a $35,000 one-year BMO GIC coming due this month. I own lots of shares in different companies, but I am enjoying the security associated with my GIC. I would like to purchase a two-year this time. Which one do you suggest?
Also, I am thinking, maybe, of putting some of that money in a Vanguard ETF. I am looking at their Growth ETF. Which one do you think is best? – Kathie S.
Answer: We’re talking apples and oranges here – the safety and low return of a GIC or the risk but potentially higher return of a stock ETF.
Before you make any decision, you need to decide on your priorities.
For GICs, you won’t get much of a return at any of the big banks. BMO is currently offering 1.6 per cent on a two-year investment, although for a limited time you can get 2 per cent on an 18-month deposit. You’ll find better returns at smaller financial institutions. Oaken Financial is offering 2.85 per cent for two years while EQ Bank has a posted rate of 2.65 per cent. Both are CDIC insured.
If you want to invest in an ETF there are lots of good ones around. The Vanguard Growth ETF Portfolio (VGRO-T) is very new (launched in January 2018) and has an unimpressive one-year return of 4.4 per cent (to June 30).
By contrast, the BMO Low Volatility Canadian Equity ETF (ZLB-T) posted a gain of 11.75 per cent over the same period.
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What’s up in the days ahead
John Reese shares some advice on a proven strategy to deal with this week’s market volatility.
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Compiled by Darcy Keith