Looking for Growing Dividends? Look No Further

These 3 companies are poised to raise their dividends for years to come.

The Motley Fool

One of the most common mistakes when investing is to go for the big dividend. While a juicy yield is very tempting, what really matters is the direction that those dividends are going in. Put simply, is the dividend likely to see increases? Can the company afford its payout? Is the company on solid footing?

If you don’t ask these questions before buying a stock, you could be facing a dividend cut, a nightmarish scenario for any investor. On that note, below are three companies that are poised to raise their payout.

1. Canadian Tire

In the United States, retailing is a very dangerous game. But in Canada, retailers are much more reliable, mainly because gigantic companies like Walmart and Amazon are not as influential. And a perfect example of a strong Canadian retailer is Canadian Tire (TSX: CTC.A).

The company’s main advantage is its footprint – over 90% of Canadians live within a 15-minute drive of a Canadian Tire store. So when competitors like Lowe’s or Target come to Canada, the best real estate is already taken by companies like Tire.

So the company is on very solid footing, yet it is paying less than 25% of its expected earnings this year out to shareholders. Tire’s expansion opportunities are limited (the company will not be entering the United States any time soon), so expect this dividend to rise in years ahead.

2. Gildan Activewear

T-shirt maker Gildan Activewear (TSX: GIL)(NYSE: GIL) has done very well recently, and as a result its shares are up 120% in the last two years. Yet the dividend has not risen at nearly the same pace. In fact, Gildan is paying out only 14% of expected earnings to shareholders, and analysts expect the company’s earnings to increase another 17% in 2015.

Gildan has more expansion opportunities than Canadian Tire. But Gildan has so much room to raise its dividend that such an event is arguably inevitable.

3. Manulife

No Canadian financial institution suffered as much as Manulife Financial (TSX: MFC)(NYSE: MFC) during the financial crisis. The company even struggled to raise sufficient capital. And since then, its recovery has come more slowly than it would have liked.

But Manulife has now come roaring back, and its future is as bright as ever. Yet its dividend has not been raised since being cut during the crisis, and now stands at only 32% of expected earnings. So there’s plenty of room for Manulife to raise its dividend, especially since the company is better-capitalized than its large peers.

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 Benjamin Sinclair has no position in any stocks mentioned. David Gardner owns shares of Amazon.com and Lowe's. The Motley Fool owns shares of Amazon.com.

More on Investing

A bull outlined against a field
Investing

After Earnings, I’m Bullish on These 2 TSX Stocks

Given their solid performances and healthy growth prospects, I am bullish on these two TSX stocks.

Read more »

Woman has an idea
Bank Stocks

3 No Brainer Bank Stocks to Buy Now for Less Than $1,000

Canadian bank stocks like Toronto-Dominion Bank (TSX:TD) appear quite cheap today.

Read more »

Dividend Stocks

Where Will Canadian Utilities Stock Be in 5 Years?

Canadian Utilities (TSX:CSU) is a classic example of a stock where the dividend is all you get. Can the company…

Read more »

Man holding magnifying glass over a document
Dividend Stocks

2 Stocks I’m Watching for Big Passive Income

Consider Bank of Nova Scotia (TSX:BNS) and another top passive-income play to power your dividend portfolio!

Read more »

Target. Stand out from the crowd
Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

These top TSX stocks have increased their dividends annually for decades.

Read more »

question marks written reminders tickets
Dividend Stocks

Better Buy: Loblaw Companies or Metro Stock?

Loblaw Companies (TSX:L) stock is riding on recent momentum. Meanwhile, Metro (TSX:MRU) is executing for future earnings growth.

Read more »

bulb idea thinking
Dividend Stocks

2 Supercharged Dividend Stocks to Buy if There’s a Stock Market Sell-Off

These two top stocks offer attractive yields, have reliable operations and are dividend aristocrats, making them two of the best…

Read more »

Dividend Stocks

Got $1,000? Buy These Hot Growth Stocks Before They Take Off

These growth stocks just reported earnings that should have investors eager for more over the next year and beyond. They're…

Read more »