Those who believe div-idends don’t matter should note the significant similarity of stock market gains, over time, to dividends gains. In contrast, earnings gains have a distant relationship with price changes — often so distant it can’t even be called a relationship.

For example, in the 12 months ended Oct. 31, the S&P/TSX composite index — excluding income trusts — gained 21%, while dividends on the index gained 19%. In contrast, earnings rose 37%.

In the long term, consider changes in the 10 years since 1996. The index (again, excluding income trusts) rose 111% and dividends rose 90%, while earnings were up 208%.

And over the past five years, the index gained 187% and dividends gained 184%. Earnings again gained by a vastly different proportion — 285%.

All this emphasizes the significance of dividends to stock prices over the long term, especially as income trusts will now be taxed out of existence.

In 2005, the Toronto Stock Ex-change recorded dividend increases by 140 companies. In the first 10 months of this year, 120 companies announced dividend increases. At that rate, the preceding full-year mark might be equalled or exceeded.

This year’s total includes increases by companies that have subsequently disappeared from the ranks of common stocks, such as Bell Aliant Inc., which became Bell Aliant Regional Communications Income Fund, and Inco Ltd., which is being taken over by Brazil’s Companhia Vale do Rio Doce (see page 49).

There were several outstanding dividend increases this year. These include the 760% boost to Corus Entertainment Inc.’s Class B dividend, which was raised in two steps; the industrial metals’ price boom led Teck-Cominco Ltd. to raise its Class B payment by 150%. In the telecom sector, Shaw Communications Inc. and Rogers Com-munications Inc. raised their Class B dividends by 144% and 113%, respectively (see table).

Then, there are the overachievers in frequency of dividend increases. Addenda Capital Inc. announced four dividend increases this year, with the indicated rate rising by 14%. Xceed Mortgage Corp. was a step behind, with three announced increases this year, doubling its payment. Shaw Communications increased its payment in three steps as well.

Dividend-paying favourites are, of course, companies that increase their payments often (see table). Financial institutions are champions at this. For example, starting in 2000, Royal Bank of Canada has raised its dividend 13 times and Bank of Nova Scotia has raised its dividend 12 times.

Companies in the Power Corp. of Canada group have done even better: Great-West Lifeco Inc. and IGM Financial Inc. have both raised their payments 14 times since 2000. And flagship Power Financial Corp. has seen 12 dividend increases since 2000.

Smaller companies can be overlooked in the dividend race. For example, McGraw-Hill Ryerson Ltd. has raised its dividend six times. Akita Drilling Ltd. has raised its dividend five times and Leon’s Furniture Ltd. four times.

The boom in steel has resulted in frequent dividend boosts for several companies. Beginning in 2004, IPSCO Inc. has raised its dividend payment six times and the payment has quadrupled. Russel Metals Inc. has boosted its payment eight times, beginning in 2002, with two increases in 2005 and two again this year.

Investors with a predilection for stocks that make regular increases should note several companies that increased their dividends last year and again this year. These include Astral Media Inc., Canaccord Capital Inc., Guardian Capital Group Ltd. , Mosaid Technologies Inc. and Pulse Data Inc.

Recent dividend data have been distorted by the addition in the past year of income trusts to the S&P/TSX composite index and its subindices. This has resulted, for example, in the index’s dividend gaining a huge 73% in the past year instead of the 19% figure I have used.

With trusts included, the index has an indicated yield of 2.4%. Take away the trusts, and the market yield is 1.7% — close to the yield of a year ago, as well as that of five years ago, and slightly below the yield of 10 years ago.

This steady dividend return shows the market has been highly valued over the past decade, because a market yield below 2% is in the historical low range — the range that is found at market tops. IE