Nothing gets customers riled up like the announcement of a fee increase.  Banks and utilities often draw the ire of customers, and for good reason.  Canadians have been getting nickel-and-dimed by the big banks and utility companies for years

Scotiabank and CIBC will increase fees on personal bank accounts beginning March 1st and April 1st, respectively.  TD Canada Trust introduced similar changes last summer, which led me to ditch my chequing account with them and open up a no fee account with ING Direct.

Customers can always shop around for the best rates and switch banks or utility providers.  But usually we end up with a short-term promotional offer that expires after three-to-six months, and then we’re right back where we started; complaining about the fees!

Why You Should Own Bank And Utility Stocks

A good way to fight off inflation is to buy shares in these companies, particularly the ones you do business with.  Be an owner, not a moaner.

For example we get our Internet through Telus, and each year our bill increases by about 5%.  As a Telus shareholder, the pain of inflation is eased by the fact that Telus has increased its dividend by 55% since 2007, an average increase of 13.67% per year.

As John Heinzl explained in a recent Globe and Mail article, utility stocks like Telus are so predictable they have been announcing dividend increases years in advance.  Telus has plans to continue boosting its dividend twice a year – at a rate of about 10 per cent annually – until at least 2013.

The banks haven’t been as generous with dividend increases in recent years, but they will likely return to dividend aristocrat status soon enough.  All of the big banks announced dividend increases in the last 12 months.

It has proven to be very profitable to own bank stocks for the long term.  Tom Connolly, author of The Connolly Report, prepared this chart on Scotiabank that shows how dividend growth has driven the price growth of this stock since 1990.

Connolly believes that retirees shouldn’t be so focused on fixed income investments.  Dividend growth stocks, like many banks and utilities, provide a growing income that’s important to help fight off inflation.

He says, “Since 1982, without adding a penny to my stock portfolio, I have watch dividend payments climb 79%.  This more than compensates for a 35% rise in the consumer price index.”

David Chilton shares an amusing story in The Wealthy Barber Returns about an investor who was beating the market with an unusual approach.  He looked for mature Canadian companies with a long track record of paying dividends.  From there, he only bought shares in firms that he did business with, but hated.

His rationale was that if he hated these businesses but is still dealing with them, they must be in a great situation.

We’re still going to complain when prices climb, especially when our recurring bills go up.  It’s human nature.  In my case, I have a portfolio filled with stocks from banks, insurance companies, utilities, and even liquor stores to help offset my personal inflation rate.

For the record, I definitely complain when the price of beer goes up 🙂


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