Over the long term, some of the best-performing investments will be high-quality dividend-growth stocks.
Any dividend stock can be a quality investment. Earning passive income while also having capital gains potential is an ideal way to invest. However, dividend stocks that consistently increase their payout to investors are often even better investments.
Stocks that consistently increase their dividends are often some of the best long-term investments, because they are businesses that are naturally always growing their operations. That’s obviously attractive from a growth standpoint. However, consistently growing operations usually means the company is quite stable, too.
So, on top of all the growth in passive income you can see over the years, you’ll also know that your capital is well protected. And although there are several high-quality dividend-growth stocks to consider, these are three of the best to buy today.
A top utility stock
Utility stocks might be the most defensive businesses you can buy and always make some of the best dividend-growth stocks.
They have stable operations which consistently grow long term. And because investors know this, the stocks are a lot less volatile than the broader market. This is why they are some of the safest dividend stocks to own.
Fortis, for example, has increased its dividend for 47 consecutive years now. If you’d owned Fortis for even just the last five years, you would have already seen your income grow by more than 25% — not to mention a total return of over 55% in the last five years. That’s not bad for an investment that’s also keeping your capital safe.
So, if you’re looking for a low-risk investment that will continuously pay you more in dividends each year, Fortis is one of the best to consider.
A top telecom stock for dividend growth
Another high-quality investment to consider is BCE (TSX:BCE)(NYSE:BCE). The stock is slightly riskier than Fortis. However, it offers a bit more growth. And rather than paying a dividend yield of 3.6% today like Fortis, BCE stock currently yields 5.7%.
As an income investment, few stocks are better than BCE. The company is the largest and most dominant in an industry that’s a staple of the economy and has decades of growth potential. So, in addition to being highly robust, BCE is also a top dividend-growth stock.
Communication is key, and telecom stocks like BCE own long-life assets, which allows them to be major cash cows. And with the introduction of 5G technology, there is a tonne of potential for continuous growth.
Over the last five years, investors of BCE have seen their dividend income grow by almost 30%.
So, if you’re looking for a high-quality investment that can offer you a significant dividend increase each year, BCE is one of the best there is.
A consumer staple stock with incredible long-term potential
The last stock to consider is the North West Company (TSX:NWC), a top consumer staple stock.
Consumer staples are another highly defensive industry. However, often, these companies don’t pay that much of a dividend.
North West is different, though. The dividend-growth stock mostly operates in remote communities, such as northern Canada and Alaska. This means little competition for the company.
And with its recent work to improve operations, selling off non-core assets, buying its own freight airline and bringing maintenance in-house, North West’s operations have improved dramatically.
The company is now seeing record profitability, and its margins have grown exceptionally. This is why its dividend continues to increase yearly.
So, if you’re looking for a high-quality dividend-growth stock with a tonne of long-term potential, North West is a consumer staple offering an incredible opportunity.
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 Daniel Da Costa owns shares of BCE INC. and THE NORTH WEST COMPANY INC. The Motley Fool recommends FORTIS INC and THE NORTH WEST COMPANY INC.