TFSA accounts are very popular for investors because the accounts allow you to earn tax-free income on dividends or capital appreciation on eligible investments. This makes growing dividend stocks very powerful, because the longer you hold these stocks, the more of a yield you will earn over time, assuming, of course, the company continues to increase its payouts.
In the list below, I have selected three growing dividend stocks that could be great additions to your portfolio today.
Suncor Energy Inc. (TSX:SU)(NYSE:SU) currently pays its shareholders a dividend of 3% per year, with quarterly distributions. The company’s current quarterly payment of $0.32 has increased from last year’s $0.29 payout for an increase of over 10%. In five years, the dividend has grown by 146% from the $0.13 per quarter that Suncor was paying in 2012, which computes to a compounded annual growth rate (CAGR) of 20%.
However, with the downturn in oil and gas, the energy giant’s hikes have slowed down, and a 20% annual increase going forward is not realistic without more of a recovery in the industry. Although the growth rate has declined, even a 10% increase every year would mean that in a little over seven years, the dividend would double.
There is hope that the company may able to sustain more growth, as in its last quarter Suncor showed a year-over-year increase in sales of 22%, and the company was also profitable for the fourth consecutive quarter. If Suncor can continue these trends, then investors may see dividend-growth rates return to previous highs.
ATCO Ltd. (TSX:ACO.X) also has exposure to oil and gas, but the company has diversified operations in many parts of the world, and this includes operating as a utility provider. The company has largely rebounded from the collapsing oil and gas industry; a few months ago, the stock reached highs over $50, which previously were not seen since 2014, when the company reached $54 per share.
ATCO’s dividend is slightly lower than Suncor’s with a yield of just under 2.9%. Despite the downturn in oil and gas, the company has not skipped a beat as it has increased its payouts in each of the past five years. The company’s most recent hike was 15%, and in five years the dividend has doubled.
ZCL Composites Inc. (TSX:ZCL) is a manufacturer and distributor of liquid storage systems, and its current yield of 3.65% is the highest on this list. The company has seen stability in its top line, while operating income has grown over 37% in just three years. The profit growth has benefited investors; in the past two years, the company has issued a special cash dividend in addition to the regular quarterly payouts that investors have come to expect.
ZCL’s quarterly dividend grew by 50% last year, with payments of $0.08 increasing to the current payment of $0.12 every quarter. Since 2012, the company’s payouts have seen an eight-fold increase, rising from a quarterly payment of just $0.015. With an earnings per share of $0.61 in the last 12 months, ZCL is currently paying out 79% of its earnings, which means there could still be room to grow payouts if the company can continue to add to its bottom line.
