3 Dividend Growth Stocks Yielding Up to 8.4%

BCE Inc. (TSX:BCE)(NYSE:BCE), Dream Global REIT (TSX:DRG.UN) RioCan Real Estate Investment Trust (TSX:REI.UN) deserve a spot in your portfolio.

| More on:
The Motley Fool

Today, I want to show you an easy-to-use formula to quickly build a portfolio of dividend stocks. And not just any dividend stocks, but dividend growth stocks.

The method is called the ‘5 + 5’ portfolio. It was developed by Daniel Peris, author of one of my favourite books, The Strategic Dividend Investor: Why Slow and Steady Wins the Race. It works like this:

  • Screen for stocks that have a dividend yield of at least 5%
  • Include only wonderful businesses that can grow their payout by at least 5% per year

Both of these parts are important. Of course, the tall yield generates the immediate stream of income that investors crave. However, distribution growth is also essential to offset inflation and generate capital gains.

Together, the combination of yield and growth should produce a 10% total return, before fees and taxes. So to get you started with this strategy, here are three dividend stocks that meet our criteria.

1. BCE Inc.

BCE Inc. (TSX: BCE)(NYSE: BCE) has the most important quality I look for in a dividend stock: a wide competitive moat.

The company has a huge advantage in the Canadian telecom business, investing billions of dollars in spectrum and its network. This is an asset that is nearly impossible for a new competitor to replicate. Combined with Rogers Communications Inc. and Telus Corporation, an oligopoly in the Canadian wireless industry means high profit margins and little competition.

This has resulted in a dependable payout for shareholders. BCE has managed to pay a dividend to its loyal investors every year since 1881. And without much in the way of competition, BCE will likely be able to pass on higher prices to customers (and higher dividends to shareholders) for decades to come.

2. Dream Global REIT

This fund allows you to become an international real estate investor without renewing your passport. Dream Global REIT (TSX: DRG.UN) is Canada’s first and largest real estate investment trust exclusively focused outside of the country. Through a series of smart acquisitions over the past few years, the trust has assembled an excellent portfolio of office properties throughout major cities in Germany.

It’s not hard to see the Dream Global investment case given that the trust yields 8.8%. And thanks to a strong German economy, the fund is poised to deliver solid cash flow growth over the next few years. Most of that upside is likely to be passed on to unitholders through distribution hikes.

3. RioCan Real Estate Investment Trust

RioCan Real Estate Investment Trust (TSX: REI.UN) is the country’s largest landlord with over 79 million square feet of real estate throughout Canada and the United States.

However, this firm isn’t your traditional landlord. RioCan specializes in commercial and retail tenants. These are rock-solid companies like Wal-Mart Stores, Inc.Canadian Tire Corporation Limited, and Shoppers Drug Mart Corporation that aren’t going out of business any time soon.

Best of all, RioCan passes on most of this rental income to its investors. Today, the trust pays a monthly distribution of 11.75 cents per unit, which comes out to an annualized yield of 5.2%.

Given that many of the fund’s leases are likely to be renewed at higher rates over the next few years, shareholders can expect that payout to grow substantially.

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 Robert Baillieul has no position in any stocks mentioned.

More on Dividend Stocks

Concept of multiple streams of income
Top TSX Stocks

The Best Stocks to Invest $1,000 in Right Now

Here are some of the best stocks that every investor should own today to generate massive income and strong growth…

Read more »

The TFSA is a powerful savings vehicle for Canadians who are saving for retirement.
Dividend Stocks

Trump’s Tariffs Could Hurt Your TFSA – But These 2 Stocks Will Keep it Safe

Worried about tariffs coming down? Then consider these two stocks to keep your portfolio safe.

Read more »

concept of real estate evaluation
Dividend Stocks

3 Top Real Estate Sector Stocks for Canadian Investors in 2025 

The Canadian real estate sector could see modest growth in 2025, but its long-term secular demand remains intact.

Read more »

Dividend Stocks

Buy These 3 Canadian Stocks Before Tariffs Change the Game

These three dividend stocks offer security, growth -- you name it. No matter what tariffs come our way.

Read more »

data analyze research
Dividend Stocks

This 7.6% Dividend Stock Is a Must-Buy as Trump’s Tariffs Hit Canada

If there's one way to add some consistency to your portfolio, it's an investment in a passive-income powerhouse like this…

Read more »

protect, safe, trust
Dividend Stocks

Trump’s Tariffs Could Cause a Recession: This 1 Canadian Stock Can Protect Your Portfolio

If you're looking for security, consider the essentials during this period of volatility in the markets.

Read more »

Pile of Canadian dollar bills in various denominations
Dividend Stocks

Invest $20,000 in These 2 Canadian Stocks to Beat Trump’s Trade War

Are you looking for security during uncertain times? These two Canadian stocks offer it in spades.

Read more »

happy woman throws cash
Dividend Stocks

Billionaires Are Buying This Canadian Stock Before Trump’s Tariffs Shake the Market

This Canadian stock doesn't just have a shot at growth under tariffs, but for long-term investors it could be a…

Read more »