One of the best inflation hedges for your investment portfolio is a familiar friend you’ve relied on since forever.
Long a non-issue, inflation has become a factor investors need to grapple with as a result of economic shifts caused by the pandemic. The old standby list of inflation-fighting investments includes gold, commodities, real estate investment trusts, real-return bonds and cash. Don’t forget to consider dividend-growth stocks as well.
Globeinvestor.com can help us find dividend-growth stocks that have increased their cash payouts by inflation-beating amounts over the past five years. The most recent inflation rate for Canada was 2.2 per cent in March, but that’s a low hurdle for strong dividend growers. Instead, let’s look at stocks that have annualized dividend growth rates of at least 7 per cent.
We’ll confine our search to the blue-chip stocks of the S&P/TSX 60 Index, and we’ll leave out companies in resource sectors. Gold miners and energy companies can be strong dividend contributors, but they’re subject to economic cycles that can constrict their ability to maintain, never mind increase, dividends. A counter-argument is that an inflationary environment would be good for commodity stocks.
Here are the S&P/TSX 60 Index stocks in all non-resource sectors with five-year annualized dividend growth of at least 7 per cent:
- Restaurant Brands International Inc. (QSR-T): 36.4 per cent dividend growth
- Canadian Pacific Railway Ltd. (CP-T): 20.5 per cent
- Alimentation Couche-Tard Inc. Class B (ATD.B-T): 20.3 per cent
- CCL Industries Inc. Class B (CCL.B-T): 19.1 per cent
- Canadian Tire Corp. Class A (CTC.A-T): 16.7 per cent
- Magna International Inc. (MG-T): 15.8 per cent
- Open Text Corp. (OTEX-T): 14.3 per cent
- Metro Inc. (MRU-T): 14.2 per cent
- Canadian Natural Resources Ltd. (CNQ-T): 13.1 per cent
- Power Corp. of Canada (POW-T): 12.4 per cent
- Enbridge Inc. (ENB-T): 11.7 per cent
- Manulife Financial Corp. (MFC-T): 11 per cent
- Algonquin Power and Utilities Corp. (AQN-T): 10 per cent
- TC Energy Corp. (TRP-T): 9.3 per cent
- Toronto-Dominion Bank (TD-T): 9.2 per cent
- Brookfield Asset Management Inc. (BAM.A-T): 8.8 per cent
- Dollarama Inc. (DOL-T): 8.3 per cent
- Emera Inc. (EMA-T): 8.3 per cent
- Sun Life Financial Inc. (SLF-T): 7.8 per cent
- Telus Corp. (T-T): 7.1 per cent
Long-time dividend investors know that there’s an ebb and flow to the rate of dividend growth at even the best-run companies. Whatever dividend-paying company you’re researching, it’s always worth a look at the investor relations page of its website to track long-term dividend growth patterns. Consistency is king.
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