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As company's dividends grow, so grows its share price.

Growth in dividend payouts and share price don't move in lockstep, but there's a close relationship over the long term. That's one of the lessons to be learned from a 24-stock dividend growth portfolio followed by Tom Connolly of DividendGrowth.ca and his son-in-law, Gary Emanuel.

They've tracked the portfolio since January 2008, an inauspicious time to buy in. The stock markets in early 2008 were set to fall steeply as the global financial crises peaked late in the year and in early 2009. We've had good, bad and sideways markets since then, with one constant. It's dividends – whether through funds or individual shares, Canadians have embraced dividends as an investing strategy.

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Now, let's refine this approach. If you're after total returns consisting of dividends plus share price gains, look to the stocks that consistently grow their quarterly cash payouts to shareholders. The DividendGrowth portfolio offers all kinds of proof. Let's start with Metro Inc., which posted share price growth of 16.1 per cent to mid-year on an annualized basis and share price growth of 17.6 per cent. The dividend at Canadian National Railway Co. rose 15.9 per cent, while the shares increased 17.4 per cent. Emera Inc.'s dividend grew 9.5 per cent, while its shares gained 9.3 per cent. The dividend at Telus Corp. grew 9.2 per cent, while the shares gained 8.3 per cent. BCE Inc.'s dividend rose 5.6 per cent, while its shares increased 6 per cent.

There were some discrepancies in the DividendGrowth portfolio. Exco Technologies Ltd. boosted its dividend by 20 per cent, but its shares rose 11.9 per cent. Loblaw Cos. Ltd.. boosted its dividend by 2.5 per cent, but the shares jumped 10.4 per cent. The only company in the portfolio with a share price decline was Power Corp. , which raised its dividend 2.2 per cent and saw shares fall by 2.2 per cent.

On average, the 24 stocks in the portfolio had dividend growth of 8.6 per cent annually and share price growth of 7.3 per cent. Dividend growth by no means ensures share price gains, but the two seem closely related.

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