Markets continue to contend with rising interest rates, inflation, supply chain pressure, and geopolitical tensions. This combination strengthens the case for investing in stocks that pay dividends. In uncertain times, investors can look to dividend growth strategies, which offer the potential to mitigate market risks while offering stability. 

At Bellwether, our investment process, known as the North American Dividend Growth Investing Strategy, mitigates risk and produces stable returns for investors during this period of rising inflation and interest rates. Dividend growth investments are often less volatile than the market and at least a portion of your annual return is “locked in” from the regular dividend income.

To fully appreciate the benefits of a Dividend Growth Strategy, we’ll illustrate how the strategy has held up during past interest rate tightening cycles. 

Dividend Growth Strategies can mitigate the risk of inflation and rising interest rates 

According to research from BMO Capital Markets, during 1994, 2004, and 2016 Fed interest rate hike cycles, dividend growth strategies outperformed 3, 6, and 12 months after the initial hike. The companies that consistently grow their dividends during these times are also more likely to deliver strong returns when inflation is above 4%.  

Investors can benefit from investing in companies that have raised dividends and have strong yields. Additionally, they can also search for companies that have the potential to hike dividends faster than the S&P/TSX and S&P500 indexes. 

Dividend growth is an offensive strategy that also offers stability 

During bouts of market volatility, dividend growth offers a source of stability that can outperform rising interest rates and inflation. Quarterly dividend payments can offer an additional source of income to help mitigate the risk of volatility and inflationary pressures. Additionally, by investing in companies that produce a sustainable and growing dividend, investors can grow their income to keep up with inflation. 

Investing in dividend stocks

There are several ways to gain exposure to dividend-paying stocks. 

1.    Access managed funds/portfolios: Bellwether’s North American Dividend Growth investment process identifies companies that have a history of increasing their dividends and are expected to continue to grow their earnings, cashflow, and dividends in the future. We actively monitor company and sector fundamentals, looking for opportunities for our dividend growth investment strategy. In short, we do all the heavy lifting for our investors so they can enjoy the benefits of our long and successful portfolio management experience. To learn more about our process, please contact us. 

2.    Invest in Exchange Traded Funds (ETFs): there are various passive management funds that can provide investors with exposure to dividend growth stocks. We also offer an ETF portfolio option.

3.    Identify dividend-paying stocks: For the more hands-on investor, the option to individually identify dividend growth stocks is also another way to invest in dividend stocks.


As market volatility, rising inflation, and interest rate pressures continue to impact the investing landscape, investors can find both a source of income stability and a way to beat inflation by investing in dividend growth stocks. Long-term investors can do well by strategically investing in companies that are likely to increase their dividends over time. Research clearly shows that companies with strong dividend payouts are more likely to outperform the market during interest rate tightening cycles. If you’re interested in learning more about our North American Dividend Growth investment process, please contact us today. 




© Bellwether Investment Management Inc. 2024. This communication is intended for residents of the provinces in which we are registered and is not meant to be a solicitation to any persons not resident in those provinces. Any opinions expressed in this article are just that, and are not guarantees of any future performance or returns. Some of the information contained in this article has been drawn from sources believed to be reliable but due to the fact that it is provided by a third party, it cannot be guaranteed to be accurate or complete. Bellwether Investment Management Inc., Bellwether Estate and Insurance Services Inc. and Bellwether Family Wealth cannot provide tax advice and therefore we recommend that you consult your tax advisor for further assistance with your tax planning and the preparation of your tax return. The report is prepared for general informational purposes only and the securities mentioned in this report should not be construed as a recommendation for any specific securities.

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