2 Top Dividend Stocks That Raised Payouts Last Week

Bank of Montreal (TSX:BMO)(NYSE:BMO) and this other stock are great options for investors that love dividends.

| More on:

Dividend growth stocks are a favourite of many investors because your cash flow will rise over time and you don’t have to do anything but hold the stock. For instance, if a company were to raise its dividend every year by 5% or more, in about 14 years those dividend payments will have doubled, and the higher the rate of increase is, the quicker that will happen.

The benefit for investors is that your original purchase is generating a much higher payout than when you first bought it. Bank stocks in particular offer great prospects for growth, as the industry provides a lot of stability and long-term growth, especially as interest rates rise and the economy continues to do well.

The two bank stocks listed below recently raised their dividend payments and could be great additions for investors looking to buy for the very long term.

Bank of Montreal (TSX:BMO)(NYSE:BMO) released its quarterly earnings last week, announcing that the bank would be raising its quarterly payment from $0.93 to $0.96, an increase of just over 3%. BMO will now pay its shareholders 3.8% per year in dividends along with any share appreciation that investors can earn from holding the stock.

In the past 12 months, the stock has risen 10%, and over the last five years it has grown by more than 60%. While the capital appreciation is great, the dividend growth makes BMO an even better buy. Quarterly payments have grown by 30% since 2013 for a compounded annual growth rate (CAGR) of 5.3%. If BMO maintains that rate of increase, then it would take a little over 13 years for its payouts to double.

In four years, BMO’s net sales have risen over 34%, while earnings have grown by 28%.

The stock is a great investment for anyone looking to earn a modest return who doesn’t want to take on too much risk to do so.

National Bank of Canada (TSX:NA) is another good option for dividend investors, as it too raised its payouts recently. Quarterly payments were bumped up two cents to $0.62, or a 3% increase, every quarter. The bank is now paying its shareholders 4% per year and is one of the highest yields you’ll find from a bank stock listed on the TSX.

National Bank’s dividend has also seen more growth than BMO over the past five years, rising 43% during that time for a CAGR of 7.3%. If the bank were to keep that rate of increase consistent, it would take less than a decade for its dividend payments to double in value. It’s a good incentive for investors to consider this lesser-known bank stock, as it’s also produced strong returns over the years.

In the past 12 months, National Bank’s stock has risen 15% and it has more than doubled in 10 years. One of the benefits of investing in a less popular stock is that it trades are more modest multiples than that of its peers, which is true for National Bank, as it is currently valued at only 11 times earnings compared to the industry average of 12.

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 David Jagielski has no position in any of the stocks mentioned.

More on Dividend Stocks

A bull and bear face off.
Dividend Stocks

The 3 TSX Stocks to Buy Before a Long-Term Bull Market Begins to Build

The TSX may not go bullish for a while, even when the economy recovers from a recession, but investors should…

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

TFSA Investors: Make $200 in Monthly Passive Income With This 1 TSX Dividend Stock

Here’s an attractive dividend stock TFSA investors can buy now to earn $200 in monthly passive income.

Read more »

A plant grows from coins.
Dividend Stocks

TFSA Investors: How to Create $40,000 in Returns and Passive Income in 30 Years

If you think you'll need just $40,000 in passive income per year in retirement, your TFSA can get you there…

Read more »

stock analysis
Dividend Stocks

Buy These TSX Dividend Shares Next Week

Are you looking for dividend stocks to add to your portfolio? Buy these picks next week!

Read more »

edit Safety First illustration
Dividend Stocks

3 of the Safest Dividend Stocks in Canada

These three dividend stocks are all high-quality companies with defensive operations, making them some of the safest investments in Canada.

Read more »

A person builds a rock tower on a beach.
Dividend Stocks

3 Stocks to Anchor Your Portfolio in a Rocky Market

Three stocks are solid anchors in any portfolio today for their outperformance in a weak market and defiance of the…

Read more »

money cash dividends
Dividend Stocks

3 Solid Dividend Stocks That Cost Less Than $30

Given their solid financials and healthy cash flows, the following under-$30 dividend stocks are a good buy in this volatile…

Read more »

grow money, wealth build
Dividend Stocks

2 High-Yield Dividend Stocks With Rock-Solid Payout Ratios

These two dividend stocks offer unbelievably high yields of more than 7% and earn more than enough free cash flow…

Read more »