Inflation-busters: Dividend Stocks with Consistently Rising Payouts

Stocks that offer some protection against inflation. Spring brought with it a thaw on frozen consumer prices in Canada and the United States. Inflation readings for May showed prices rising by 2.3 per cent in Canada over the past year, while the U.S. figure registered at 2.1 per cent. The Canadian consumer price index came in above the Bank of Canada’s 2-per-cent target for the first time in two years. Investors may find themselves reconsidering the corrosive effects of inflation on their wealth. Since stocks have a reputation for serving as hedges against inflation, we went looking for candidates that fit the description.

Rising prices can erode the value of dividend income, so we wanted to identify companies that have been increasing their dividends consistently. We first screened for companies with a five-year annual dividend growth rate of at least 20 per cent. Next, we looked for companies with a history of high profitability in different economic climates. The five-year average return on equity had to be higher than 15 per cent. Last, companies with pricing power can offset inflation by passing cost increases on to their customers through raising prices.

Source: Globe and Mail

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