Even today’s high inflation is no match for these dividend growth stocks

An investor’s best response to inflation is a dividend stock that increases its payouts by amounts that match or exceed the rising cost of living.

There are many stocks in the Canadian market that meet these criteria, and some of them can be bought at discounted prices. To find examples, I searched my collection of Globeinvestor.com watchlists for the one that tracks the S&P/TSX 60 index of major blue chips. Using the dividend view, I ranked the stocks in the index by the amount of their five-year dividend growth.

The next step was to look for stocks that have a negative 12-month yield and five-year annualized dividend growth that exceeds the last reported inflation rate of 7.6 percent. Commodity stocks were removed from the list because the growth in the dividends they pay depends on volatile commodity prices. No yield constraints have been applied to this screen so the results may not be satisfactory if you are looking for significant dividend income. But if you’re looking for inflation-fighting dividend growth, here are some ideas to encourage further research.

The following was displayed on the screen:

Restaurant Brands International Inc. (QSR-T): Five-year dividend growth of 27.9 percent on a one-year share price decline of 2.7 percent earlier this week, according to Globeinvestor. The dividend yield was 3.5 percent.

CCL Industries Inc. (CCL-BT): Five-year dividend growth of 16 percent, one-year share price decline of 5.3 percent and a yield of 1.4 percent.

Canadian Tire Corp. (CTC-AT): Five-year dividend growth of 15.4 percent, one-year share price decline of 15.2 percent and a yield of 3.6 percent.

OpenTextCorp. (OTEX-T): Five-year dividend growth of 13.1 percent, one-year price decline of 39.8 percent and a yield of 3.2 percent.

Magna International Inc. (MG-T): Five-year dividend growth of 11.5 percent, one-year share price decline of 22.6 percent, and a yield of 3 percent.

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Algonquin Power & Utilities Corp. (AQN-T): Five-year dividend growth of 10 percent, one-year share price decline of 7.1 percent and a yield of 5.1 percent.

Manulife Financial (MFC-T): Five-year dividend growth of 9.6 percent, one-year price decline of 4.1 percent and a yield of 5.6 percent.

Brookfield Asset Management Inc. (BAM-AT): Five-year dividend growth of 8.5 percent, one-year share price decline of 4.6 percent and a yield of 1.1 percent.

Gildan Activewear Inc. (GIL-T): Five-year dividend growth of 8.2 percent, one-year price decline of 10.3 percent and a yield of 2 percent.

Note that a five-year dividend history doesn’t guarantee similar increases in the future. However, it’s an indicator of a company that’s committed to consistently increasing its payout to offset inflation.

— Rob Carrick, personal finance columnist

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Compiled by Globe Investor staff

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