High growth and juicy dividend yields are two of the many components of a dream stock. But not every dream comes true, and you have to decide whether you want your stock with a better dividend streak or fast growth rate. It also depends upon your risk tolerance, overall portfolio, formula for asset diversification, and short-term or long-term goals, among a wide variety of other things.
For this article, I have chosen two stocks that have unflattering dividend yields but substantial growth potential.
An independent fuel and petroleum supplier company
Parkland Fuel (TSX:PKI) is the country’s largest independent suppliers and marketers of fuel and petroleum. The company also holds a dominant position in the Caribbean and is significantly improving its footing in the United States. The company owns and operates about 200 convenience stores and several retail fuel stores. It also supplies bulk fuel packages for commercial purposes.
The company works under several different brands and has a properly diversified portfolio. This is evident in the company’s continually growing market value. Currently, it’s trading at $47.4 per share, which is the result of five years of (dividend-adjusted) growth of 152%. Even at a conservative estimate, this equates to a five-year CAGR of 20.34% and offers the potential of doubling your capital in the next five years.
The company is also a Dividend Aristocrat. It increased its payouts for eight consecutive years. Currently, the company offers a dividend of $0.0995 per share, equating to a passable yield of 2.59%.
A solid REIT
Killam Apartment REIT (TSX:KMP) is an apartment and manufactured communities REIT. The company has developed a $3.3 billion asset portfolio and stands as one of the country’s largest residential landowners. The company owns residential real estate, apartment buildings, and manufactured home communities all over the country in addition to a few commercial properties.
Killam REIT is not a Dividend Aristocrat yet, but the company has been increasing its payouts steadily. Currently, it offers a decent yield of 3.19%. The stock seems steady, with a beta of 0.47. A profit margin is an amazing number of 84.32%, and the operating margin is 56%. The company grew its quarterly earnings by 72% on year-to-year basis.
The best part about Killam, however, is its growth. When you look at the way the company has increased its market value in the past five years, its growth chart might as well be a straight line. Even in the worst of cases, the stock hasn’t fallen more than 15% in the past five years, and the overall returns have been 137%. The CAGR over the same period is 18.88%.
Steady dividend and market value growth and dominant positions in respective sectors make Killam and Parkland Fuel worthy of investor attention — that is, if you are ready to look past the dividend yield and put your money on the growth of the stocks.
Renowned Canadian investor Iain Butler just named 10 stocks for Canadians to buy TODAY. So if you’re tired of reading about other people getting rich in the stock market, this might be a good day for you.
Because Motley Fool Canada is offering a full 65% off the list price of their top stock-picking service, plus a complete membership fee back guarantee on what you pay for the service. Simply click here to discover how you can take advantage of this.
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 Adam Othman has no position in any of the stocks mentioned.