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Income investors with cash on hand are big winners in a stock market decline like we’re seeing right now.

Concerns about economic weakness caused by the spread of coronavirus led to Tuesday’s emergency rate cut by the U.S. Federal Reserve, with the Bank of Canada expected to follow suit on Wednesday. As of March 2, the yield on a five-year Government of Canada bond was right around 1 per cent. Meanwhile, falling share prices have pushed up dividend yields on the common shares of blue-chip companies.

Let’s look for stocks in the blue-chip S&P/TSX 60 Index to keep an eye on as falling markets drive their dividend yields higher. We’ll screen for:

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  • Stocks down more than 10 per cent for the final five trading days of February;
  • Stocks with double-digit annualized five-year dividend growth, according to Globeinvestor.com;
  • Stocks with a yield higher than 3 per cent.

The four stocks that came through this screen are:

  • Manulife Financial Corp. (MFC-T): The yield as of March 2 was 4.9 per cent. Annualized five-year dividend growth clocks in at 11.9 per cent. Investors with a long memory will recall that Manulife cut its dividend in half in the summer of 2009, in the aftermath of the global financial crisis.
  • Enbridge Inc. (ENB-T): This stock had been on a roll since last fall, but the dividend yield is still unusually high at 6.5 per cent. Five-year dividend growth was 16.1 per cent.
  • Suncor Energy Inc. (SU-T): The yield as of March 2 was 5 per cent, while the five-year dividend growth was 14.6 per cent. Impressive for a company in the hard-hit energy sector.
  • Canadian Tire Corp. (CTC.A-T): The yield from this retailing giant is in the 3.4-per-cent range, while five-year dividend growth comes in at a very strong 20.8 per cent.

If you’re looking at these and other dividend growth stocks in falling markets, make sure you have the right mindset. What you’re doing, first and foremost, is locking in an attractive dividend yield. Capital gains may come, too. In fact, strong dividend growth stocks tend to deliver steady gains over the years. But in the interim, you must prepare for further price declines. If this happens, you can console yourself with those quarterly dividend payments.

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