3 Dividend Growth Stocks to Buy and Forget About

These three dividend growth stocks should be the foundation for any portfolio.

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There are certain stocks in an investor’s portfolio that rise above the rest. Like clockwork, they just keep chugging forward. They never experience any huge problems. They have terrific management. And once a year, they increase their dividends, keeping income-hungry investors happy.

These are the kind of stocks that you buy and tuck away forever. Every now and again you take a look at your statements, see how your original investment and dividends have gone up nicely, and get all warm and tingly inside. These are the types of investments that make the struggle of managing your own portfolio worthwhile.

These forever stocks never seem to get particularly cheap. Whenever there’s any sort of downturn, investors flood in and buy up shares. Chances are that most of these new purchases are just existing investors piling in and buying more.

Here are three stocks that every Canadian should have in their portfolio and be happy to hold for decades.

1. Suncor

As go the oil sands, so goes Canada. It’s that simple.

The oil sands are the biggest reserves of crude oil on the planet. At current production levels, we have more than a century’s worth of bitumen resting under the ground in northern Alberta. That’s a huge amount of economic activity.

Even if the United States continues to increase its oil production, oil sands exports will continue to be a huge part of overall Canadian economic activity. We can always export this crude to other markets, particularly Asia.

This all paints a rosy long-term picture for Suncor (TSX: SU)(NYSE: SU), the largest player in the oil sands, with some 400,000 barrels of oil produced each day. Even though increased costs are starting to become an issue in the region, the company owns some of the lowest-cost production in the area, and still has decades of reserves left. It is well positioned to be the producer of choice for years.

Plus, the stock is attractively valued. It trades at a nice discount to book value, and has a forward price-to-earnings ratio of less than 11 times. It only has a 2.1% dividend yield currently, but it makes up for it in growth, increasing the dividend by more than 50% in the past five years.

2. Telus

I continue to be impressed with the management of Telus (TSX: T)(NYSE: TU) management, and its ability to grow in the ultra-competitive Canadian wireless market.

The company is also making significant inroads with its new cable and satellite TV service. As of the most recent quarter, Telus has signed up 815,000 households for its television service, impressive numbers considering it only offers the service in Alberta, B.C., and Quebec.

Telus has always been dominant in western Canada, and is now gaining significant market share in eastern Canada. The vast majority of its wireless subscriber strength is coming from Ontario and Quebec. Additionally, it has kept its churn rate below 1% for the past three quarters, meaning it’s doing an exceptional job of keeping current customers from leaving.

Income investors have to be happy with the company’s dividend growth. Telus has pledged to grow its dividend twice a year until 2016, and has increased its quarterly payout by more than 50% since 2009. Additionally, the company has also been aggressive in buying back its shares, further rewarding shareholders.

3. Potash Corporation

Although I think Canadian farmland is overvalued, I can’t help but to be bullish on the long-term prospects of Potash Corporation (TSX: POT), Canada’s largest producer of the main ingredient in fertilizer.

As the world’s population continues to grow, so does our demand for food. Canadian farmers are well positioned to be the main beneficiaries of this, since we have the climate and water needed to be an agricultural powerhouse. As agricultural commodity prices continue to creep up, so will the price of fertilizer.

Income investors are happy that the company has finally started paying out a significant percentage of its earnings in dividends. The stock currently yields almost 4%, and is poised to grow nicely.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Nelson Smith has no position in any stock mentioned in this article. The Motley Fool owns shares of PotashCorp.

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