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5 Top Dividend-Growth Stocks for Your Retirement Income

Investing in dividend-growth stocks is a proven way to create wealth. That’s why I’m a big fan of companies that reward their investors with higher payouts each year.

If you’re a long-term investor looking to build your retirement income, you should definitely consider investing in dividend-growth stocks. There are three main reasons why I like this type of investing.

First, it’s a great way to build savings for your nest egg. In today’s work environment, when many employers are phasing out pensions, adopting this investment strategy has become extremely important. A portfolio of dividend-growth stocks can provide safe retirement income that should keep up with inflation.

Second, companies that offer regular dividend increases run mature and stable businesses. Rewarding investors on a sustained basis also tells us a lot about the management’s long-term philosophy. These are the companies that care about their reputation and want loyal investors.

Third, regular increases in dividends also tell us about a company’s ability to predict its future. It would look very unprofessional and damaging for a management to hike dividends only to cut them after a couple of quarters.

So, keeping these benefits in mind, I’ve picked five Canada’s top dividend-growth stocks. These companies have long histories of rewarding their investors and have made their intentions public about the future hikes.

Stock Dividend Yield Market Cap
Fortis Inc.  (TSX:FTS)(NYSE:FTS) 3.56% $18.79 billion
Algonquin Power & Utilities Corp. (TSX:AQN)(NYSE:AQN) 4.34% $5 billion
Enbridge Inc.  (TSX:ENB)(NYSE:ENB) 4.66% $86.18 billion
Bank of Nova Scotia  (TSX:BNS)(NYSE:BNS) 3.92% $96.49 billion
Toronto-Dominion Bank (TSX:TD)(NYSE:TD) 3.36% $132.16 billion

Source: Google Finance

Let’s say a few words about them.

Canadian utilities are on top of my list of the companies that boost their distributions regularly. I believe they’re among the safest picks for you to earn stable income to build your retirement portfolio. They have most of their revenues guaranteed from governments, and threats to their businesses are minimal.

Fortis, a gas and electric utility operator, has a 43-year history of dividend growth, and it plans to hike its payout at an annual rate of 6% through 2021. Similarly, Algonquin Power is targeting 10% dividend growth annually.

Enbridge, the largest pipeline operator in North America, plans to increase its dividend payout between 10% and 12% each year through 2024 as it undertakes a massive capital-growth program following its acquisition of Spectra Energy last year.

Canadian banks are the safest bet for your dividend-growth portfolio. The main reason for this stability is that they operate in a healthy and growing business environment due to very limited competition at home and their expansion abroad.

Growing their dividend payouts is also a main objective of their business strategy. On average, Canadian banks distribute 40-50% of their income to investors in dividends each year.

Among the six major Canadian banks, I particularly like Bank of Nova Scotia and Toronto-Dominion Bank. These lenders have a good mix of assets in both Canada and abroad — a feature that provides strength and a depth to their earnings potential.

Bank of Nova Scotia, for example, has delivered dividend increases 43 of the last 45 years — one of the most consistent records for dividend growth among major Canadian companies.


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Fool contributor Haris Anwar has no position in the companies mentioned.The Motley Fool owns shares of Enbridge. Enbridge is a recommendation of Stock Advisor Canada.

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