20 dividend growers with rising total returns

February 20, 2013

What are we looking for?

Steady dividend growers with a dash of momentum.

These two criteria were selected to reflect a couple of investing styles that are very popular right now.

To satisfy the current fascination with dividends, I went looking for companies that have increased their payouts every year for the past five years.

To appease the momentum followers, I selected companies that have enjoyed strong recent returns.

How we did it

Bloomberg provided a screen of U.S. and Canadian companies that have increased their dividends each year for at least five years.

I then sorted the table by each stock's total return in the year to date. The top 20 are shown in the accompanying table.

What we found

Three Canadian companies made the list: SNC-Lavalin, AGF Management and Ensign Energy Services. SNC, of course, has recently been in the news as a result of allegedly making illegal payments to win contracts. AGF is in the highly competitive mutual fund business, and must compete for customers with the big banks.

At the top of the U.S. list are firms such as Best Buy, the beleaguered electronics retailer, and Pitney Bowes, a maker of postage meters.

Are these companies actually tempting investments? I suspect that many of the big year-to-date gains listed here reflect a bounce back from pessimism about these firms, rather than outright enthusiasm about each company's long-term prospects for beating the market.

More broadly, these stocks' momentum may result from the current popularity of dividend investing. Many people are now eager to buy any stock that promises a regular dividend – and even more eager to buy one that has steadily increased its dividend.

Short-term traders will find intriguing possibilities in today's screen. For the most part, though, readers should approach today's list with caution. While dividend investing and momentum investing can each produce outstanding results, the combination of the two isn't necessarily a winner.

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