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

There are plenty of stocks that meet this criteria in the Canadian market, and some of them can be bought at marked-down prices. To find examples, I dug into my collection of Watchlists for the one tracking the S&P/TSX 60 index of big blue chips. Using the dividend view, I ordered the stocks in the index by the amount of their five-year dividend growth.

The next step was to screen for stocks that had a negative 12-month return and a five-year annualized dividend growth exceeding the most recently reported inflation rate of 7.6 per cent. Resource stocks were removed from the list on the basis that growth in the dividends they pay depends on volatile commodity prices. No yield constraints were applied to this screen, so the results may not satisfy if you’re looking for substantial dividend income. But if you’re looking for inflation-fighting dividend growth, there are some ideas here to prompt further research.

Here’s what the screen turned up:

  • Restaurant Brands International Inc. (QSR-T): Five-year annualized dividend growth of 27.9 per cent, according to Globeinvestor, with a one-year share price decline of 2.7 per cent as of mid-September. The dividend yield was 3.5 per cent.
  • CCL Industries Inc. (CCL-B-T): Five-year dividend growth of 16 per cent, a one-year price drop of 5.3 per cent and a yield of 1.4 per cent.
  • Canadian Tire Corp. (CTC-A-T): Five-year dividend growth of 15.4 per cent, a one-year price drop of 15.2 per cent and a yield of 3.6 per cent.
  • Open Text Corp. (OTEX-T): Five-year dividend growth of 13.1 per cent, a one-year price drop of 39.8 per cent and a yield of 3.2 per cent.
  • Magna International Inc. (MG-T): Five-year dividend growth of 11.5 per cent, a one-year price drop of 22.6 per cent and a yield of 3 per cent.
  • Algonquin Power & Utilities Corp. (AQN-T): Five-year dividend growth of 10 per cent, a one-year price drop of 7.1 per cent and a yield of 5.1 per cent.
  • Manulife Financial Corp. (MFC-T): Five-year dividend growth of 9.6 per cent, a one-year price drop of 4.1 per cent and a yield of 5.6 per cent.
  • Brookfield Asset Management Inc. (BAM-A-T): Five-year dividend growth of 8.5 per cent, a one-year price drop of 4.6 per cent and a yield of 1.1 per cent.
  • Gildan Activewear Inc. (GIL-T): Five-year dividend growth of 8.2 per cent, a one-year price drop of 10.3 per cent and a yield of 2 per cent.

Note that a five-year dividend history does not ensure similar increases looking forward. However, it is an indicator of a company committed to consistently raising its payout in a way that helps offset inflation.

-- Rob Carrick, personal finance columnist

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Compiled by Globe Investor Staff

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