Interested in some reasonably priced inflation protection for your portfolio?
Dividend growth stocks are worth a look. Despite huge gains for stocks in the past 12 months, there are some blue-chip dividend payers trading in mid-July at levels that suggest they’re fairly priced or better on a historical basis.
The inflation rate in Canada most recently hit 3.6 per cent, compared with a 10-year average of just 1.6 per cent. On a list of 23 dividend growth stocks recently supplied by Tom Connolly of DividendGrowth.ca, each produced an average annual dividend growth rate close to or more than 3.6 per cent. The average annual dividend growth rate for the group was 7.8 per cent.
Mr. Connolly has been one of this country’s top experts on dividend stocks for decades – he reached his 40th anniversary writing about them in June. Every so often, he sends me some data with an interesting story to tell. The latest example is a list of 23 dividend growth stocks, shown with their current yield and their average yield from 2011 through 2020.
Several stocks have yields today that are above their longer-term average, which suggests they are reasonably priced. Remember, yield and share prices move in opposite directions. If the yield is higher than usual, it suggests price growth has lagged.
Here are examples of dividend growth stocks representing a variety of sectors that appear to be reasonably priced by the yield measure:
- BCE Inc. (BCE-T): Globeinvestor.com shows the current yield at 5.7 per cent, while Mr. Connolly’s data peg the average yield from 2011 through 2020 at 4.7 per cent; BCE’s annualized dividend growth rate during that period was 5.3 per cent, while the price increased by 4.6 per cent on an average annual basis.
- TC Energy Corp. (TRP-T): A current yield of 5.8 per cent and a long-term average yield of 4.2 per cent; the long-term average dividend growth rate was 6.9 per cent, while the shares averaged gains of 4.3 per cent.
- Bank of Nova Scotia (BNS-T): A current yield of 4.7 per cent and a long-term average yield of 3.9 per cent; the long-term average dividend growth rate was 5.8 per cent, while the shares averaged gains of 4.2 per cent.
- Enbridge Inc. (ENB-T): Current yield 6.9 per cent, long-term average yield 3.9 per cent; the dividend has grown by a long-term average 12.7 per cent, while the shares have gained an average 4.1 per cent.
- Canadian Utilities Ltd. (CU-T): Current yield 5 per cent, long-term yield 3.5 per cent; The dividend has risen by an average 8 per cent, compared with 2.4 per cent for the shares.
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