The Quest to Double Your Income

Quality investments, dividend growth, and time all play a part in the quest to double your income. You can start with stocks such as Fortis Inc. (TSX:FTS) and ATCO Ltd. (TSX:ACO.X). Here’s how…

| More on:
The Motley Fool

Mature businesses that continue to grow pay growing dividends to share the profits with shareholders. You’d think that by being part owners of these businesses that shareholders are rightfully entitled to dividends.

However, it’s not mandatory for companies to pay dividends. That’s why if you care about receiving consistent dividends, you should buy businesses that have a culture or a history of doing so.

Three of the top five Canadian dividend-growth businesses that are publicly traded are utilities. These three utilities have paid growing dividends for at least two decades. They include Canadian Utilities Limited (TSX:CU), Fortis Inc. (TSX:FTS), and ATCO Ltd. (TSX:ACO.X).

If you’re new to investing, those are great businesses to start your portfolio because of their earnings strength and dividend-growth history.

Grow your income

Simply stick with quality businesses such as these utilities and see your money grow in time.

Stock prices are volatile and unpredictable in the short term. But dividends are more predictable because you can determine if they’re safe or not by looking at the earnings power of the business and the payout ratio–the percentage of earnings that’s paid out.

Even if you’d bought these utilities only 10 years ago in January 2005, you would have seen these amazing results with your income growth.

More than double your income!

Ten years ago you could have bought ATCO shares for $15 per share. In 2005 you would have received an annual payout of 38 cents per share from its quarterly dividend of 9.5 cents per share.

Today the utility has an annual payout of 99 cents per share, which is a quarterly dividend of 24.75 cents per share. In essence, your income would have increased 160% in 10 years.

You could have also bought Canadian Utilities shares for $15.50 per share. In 2005 you would have received an annual payout of 56 cents per share from its quarterly dividend of 14 cents per share.

Today the utility has an annual payout of $1.18 per share, which is a quarterly dividend of 29.5 cents per share. In essence, your income would have increased 110% in 10 years.

You could have bought Fortis shares for $17.20 per share. In 2005 you would have received an annual payout of 57.6 cents per share.

Today the utility has an annual payout of $1.50 per share, which is a quarterly dividend of 37.5 cents per share. In essence, your income would have increased 143% in 10 years.

In conclusion

You shouldn’t put all of your money in utilities. You probably want to build a diversified portfolio of quality dividend-growth stocks to spread your risk around.

For example, Bank of Nova Scotia is one of Canada’s top banks and a good long-term investment that has paid dividends since 1832. Telus Corporation is another good choice. Both companies yield over 4% today and their dividends are expected to continue growing.

The main idea is to hold quality businesses that have a history of growing dividends such as all of the companies I’ve mentioned in this article. Hold them for a long time and you’ll see your income double or more.

For instance, Fortis targets annual dividend growth of 6% through 2020. If it continues growing dividends at that rate, the income from an investment in Fortis today would double in 12 years.

What’s more? Dividend growth will eventually lead to price appreciation.

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 Kay Ng owns shares of ATCO LTD., CL.I, NV, CANADIAN UTILITIES LTD., CL.A, NV, FORTIS INC, TELUS (USA), and Bank of Nova Scotia (USA).

More on Dividend Stocks

Soundhound AI is a leader in voice recognition software
Dividend Stocks

3 Top Telecommunications Sector Stocks for Canadian Investors in 2025

The telecom sector in Canada is still in distress, and investors are naturally wary. But it's also a promising opportunity…

Read more »

A plant grows from coins.
Dividend Stocks

Invest $15,000 in This Dividend Stock for $1,135 in Passive Income

Beyond regular income, dividend stocks can provide some strong returns as well!

Read more »

Hourglass and stock price chart
Dividend Stocks

1 Practically Perfect Canadian Stock Down 14% to Buy and Hold Forever

If you want perfection, this railway stock is one of the best buys to grab for a steal of a…

Read more »

Safety helmets and gloves hang from a rack on a mining site.
Dividend Stocks

3 Top Utilities Sector Stocks for Canadian Investors in 2025

These three utility stocks are excellent additions to your portfolio, given their stable cash flows and consistent dividend growth.

Read more »

construction workers talk on the job site
Dividend Stocks

2 Safer Canadian Stocks for Cautious Investors

For cautious investors looking for steady income and long-term growth, both Toronto-Dominion Bank and Canadian Natural Resources are good considerations.

Read more »

dividends grow over time
Dividend Stocks

A Canadian Utility Stock to Buy for Big Total Returns

Here's how Emera (TSX:EMA) stock – a Canadian utility gem with a 5.2% yield – could generate outsized total returns…

Read more »

a person prepares to fight by taping their knuckles
Dividend Stocks

Got $30,000? Buy These 3 Canadian Stocks Before Tariffs Change the Game

Worried about the stock market? Worry no more with these protection-proof dividend stocks.

Read more »

dividend growth for passive income
Dividend Stocks

Top Dividend-Growth Stocks to Buy Now in Canada

These Canadian stocks are growing dividends at a solid pace and offer compelling yield, making them top income bets.

Read more »