Many investors may find themselves in a position where they need current income, but also need that income to increase over time. Whether it is an anticipated growth in living expenses or simply wanting to keep up with inflation, there are many reasons why investors may need their income to increase over time.
Luckily, there are many great Canadian stocks that can fulfill an investor’s need for both current income and income growth. Three such stocks are TELUS Corporation (TSX:T)(NYSE:TU), Toronto-Dominion Bank (TSX:TD)(NYSE:TD), and Enbridge Inc. (TSX:ENB)(NYSE:ENB).
In a post-pandemic world, Telus is the best situated of the Big Three telecom companies. This is partly because Telus does not have heavy investments in sports and sports media like such companies as BCE Inc. and Rogers Communications Inc. Sports have been hard hit and professional leagues have come to a standstill. As sports resume, they will likely do so without fans for a significant period.
Conversely, Telus has a health division called Telus Health. This division was created following Telus’s purchase of Emergis back in 2007. Telus Health provides IT solutions to the healthcare industry. Needless to say, Telus’ non-core venture is better positioned than BCE’s and Rogers’s sports empires are to succeed in a post-pandemic world.
Telus currently yields 5.1%. Telus has raised its dividend roughly 9% per year for the past decade. If Telus continues this rate of dividend growth into the future, Telus’s dividend should double in 8 years.
TD Bank is one of the Big Five Canadian banks. All of the Big Five have a long and storied dividend history. TD’s unique aspect among the Big Five is that it has the most U.S. exposure. The bank actually has more branches in the United States than it does in Canada, although its Canadian loan book is still larger than its U.S. loan book.
The U.S. exposure has provided significant currency tailwinds, as well as a sharp job market recovery in May and June. This has certainly helped TD protect the value of its loan book and limit its impaired loan losses. This is evident as other Big Five peers, such as The Bank of Nova Scotia, with exposure to harder hit economies, have lagged TD’s performance since March.
TD currently yields 5.3% and has raised its dividend roughly 10% per year for the past decade. If TD continues this rate of dividend growth into the future, TD’s dividend should double within 8 years.
Enbridge is one of the best plays in the energy space for dividend investors. This is because Enbridge, as a midstream company, makes money on the movement of oil and gas. It is far less sensitive to the price fluctuations of oil and gas than a company such as Suncor Energy Inc, enabling it to pay consistent and growing dividends for the past 25 years.
Another advantage that Enbridge has is that pipelines are high-moat assets, which means that they are hard to replicate and build. Pipelines are very expensive to build, and building them is fraught with political risk as well. Therefore, owning pipelines that are currently in operation provides Enbridge with a competitive advantage that is unlikely to be eroded anytime soon.
Enbridge currently yields 8.1%. Enbridge has raised its dividend by roughly 14% per year for the past decade. If Enbridge continues this rate of dividend growth into the future, Enbridge’s dividend should double within 6 years.
T Dividend data by YCharts
There is no need to sacrifice income growth for a high and stable starting yield. Telus, TD Bank, and Enbridge are all excellent examples of stocks that will generate substantial, yet growing, income streams for investors.
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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.
The Motley Fool owns shares of and recommends Enbridge. Fool contributor Kyle Walton has no position in the companies mentioned.