There may not be a better inflation fighter than the double-duty dividend stock.
The double-duty stock offers a dividend yield at or better than the inflation rate, and a history of raising dividends by average annual amounts that meet or exceed inflation. In the S&P/TSX 60 index of big blue chips, there are seven such stocks right now.
To find them, I ranked stocks in the index by dividend yield and then carved off the ones with yields at or better than the 5.2-per-cent inflation rate for February. This group was then screened to find stocks with five-year annualized dividend growth of 5.2 per cent or better and no recent dividend cuts.
One thing to note before we look at the list of double-duty dividend stocks is that high yields are a sign of investor concern. Think of big blue chips with yields above 5 per cent as being out of favour, possibly because of concern about future dividend increase or even the risk of a reduction in the amount of dividends paid.
Now for the list:
- Enbridge Inc. (ENB-T): The yield is about 6.9 per cent and five-year dividend growth has averaged 7.4 per cent. Recent dividend hikes have come in below that level.
- TC Energy Corp. (TRP-T): Yield of 6.9 per cent, five-year dividend growth of 7.6 per cent.
- Bank of Nova Scotia (BNS-T): Yield of 6 per cent, dividend growth of 5.9 per cent
- Power Corp. of Canada (POW-T): A 6-per-cent yield and dividend growth averaging 7 per cent over the past five years.
- Canadian Imperial Bank of Commerce (CM-T): Yield of 6 per cent, dividend growth at 5.2 per cent.
- Manulife Financial Corp. (MFC-T): A 6-per-cent yield and dividend growth of just under 10 per cent.
- Telus Corp. (T-T): Yield of 5.2 per cent, dividend growth of 6.6 per cent.
One stock that just missed the cut is Suncor Energy Inc. (SU-T), with a dividend yield of 5 per cent and five-year dividend growth of just under 8 per cent.
Given the high yields on the double-duty stocks, it shouldn’t be a surprise that all of them were down over the past 12 months. Hardest hit were TC Energy, CIBC and Scotiabank, while Manulife and Power Corp. fell the least. Suncor was up 2 per cent.