Forget Bank Stocks: 2 Top Picks for Dividend Growth

Bank stocks can be great investments for their stability and income, but these two top dividend-growth stocks offer far more long-term potential.

| More on:
grow dividends

Image source: Getty Images

Bank stocks are an investor favourite; they’re some of the most popular stocks among Canadian investors. This is understandable, considering Canada’s banking industry is extremely stable, and these stocks offer great long-term dividend growth.

Investors generally know what they are getting with bank stocks. While you can’t predict what they’ll do in the short term, you can expect consistent and stable growth over the long term.

Bank stocks aren’t necessarily the best stocks to buy, though. There are tonnes of stocks that offer a lot more growth potential, whether in the financial industry or a different industry altogether.

So, while bank stocks can provide you adequate gains, here are two of the best Canadian stocks to buy if you’re looking for high-quality dividend growth.

A high-growth dividend stock

The telecom industry is another great industry for long-term investments — similar to financials. Telecoms are a staple, and these businesses generally have high-quality, long-life assets, giving the industry massive barriers to entry.

So, while the sector is full of great stocks that are worth an investment, the best to buy if you’re looking for dividend growth is Telus (TSX:T)(NYSE:TU).

Telus has long been one of the top dividend-growth stocks in Canada. It’s been investing in growth for years, building out its fibre-to-the-home infrastructure. This should help grow sales and margins, resulting in major profitability increases for investors.

Furthermore, it already has a massive runway for growth with the introduction of 5G technology. And as a leader in Canada, the company is well positioned to benefit from this long-term growth in the industry. The dividend-growth stock consistently has one of the best networks and customer service, resulting in one of the lowest churn rates in the industry.

Its dividend though is one of the most attractive features of Telus. Over the last five years, the dividend has been increased by nearly 40%. Stocks that are increasing their dividends that significantly usually have low yields. Telus stock, though, is currently yielding an impressive 4.5%.

So, if you’re looking for a high-quality dividend-growth stock to buy today, Telus is one of the best there is.

A top infrastructure and construction company

In addition to Telus, another high-growth dividend stock is Aecon Group (TSX:ARE).

During periods of economic turmoil, as we have seen over the last year, one trick governments use to stimulate the economy is increasing their spending. And often, the best way to inject money into the economy while improving public goods for its citizens is by investing in major infrastructure and construction projects.

That’s why you may want to consider investing in Aecon, a top construction and infrastructure business. Not only is it a billion-dollar company, but it also has tonnes of expertise in various areas, including utilities, infrastructure and the industrial sector.

Plus, in addition to being a construction company, the business also offers design, financing, engineering, and fabrication services.

Aecon is well positioned to grow its business and operations rapidly over the coming years. It has over $6.5 billion of backlog and the growing potential to bid on new projects in this economic environment.

Furthermore, it continues to increase its dividend each year. Unlike Telus, its yield today is considerably low. However, typically, stocks with lower yields can provide you with higher dividend-growth potential, because more of the capital is being retained today to invest in growth for the future.

So, although the dividend may be low, if you believe in Aecon’s ability to grow operations, you’d rather the business invest in itself.

And over the years, the cash it will return to you can grow rapidly. In just the last five years, the dividend has grown by more than 50%, faster than Telus’s.

So, if you’re looking for a dividend stock that can continue to grow its operations rapidly, Aecon is a great company to consider, especially in this economic environment.

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 has no position in any of the stocks mentioned. The Motley Fool recommends TELUS CORPORATION.

More on Dividend Stocks

Woman has an idea
Dividend Stocks

3 No-Brainer Best Dividend Stocks in Canada to Buy With $500 Right Now

Are you craving more cash flow? $500 in one of these best dividend stocks in Canada might deliver a slice…

Read more »

Canadian energy stocks are rising with oil prices
Dividend Stocks

5 Stocks Whose Dividends Just Keep Growing

Stocks like Enbridge and Fortis are growing their dividends for decades, and returning higher cash to their shareholders.

Read more »

Dividend Stocks

2 Stocks I’m Loading Up On in 2024

Restaurant Brands International (TSX:QSR) and another stock I'm pretty close to buying right here, right now.

Read more »

protect, safe, trust
Dividend Stocks

RRSP Investors: 2 Superior Dividend Stocks for Optimal Returns

Superior dividend stocks like the Canadian National Railway (TSX:CNR) can add income power to your portfolio.

Read more »

Increasing yield
Dividend Stocks

TFSA Passive Income: 2 High-Yield Stocks to Buy Before They Bounce

These top TSX dividend-growth stocks look cheap today and offer high yields.

Read more »

Portrait of woman having fun in the street.
Dividend Stocks

Why I Can’t Stop Buying Shares of This Magnificent High-Yield Dividend Stock in My TFSA

This dividend stock continues to be a top winner, even with returns falling the last few years. We're nearing some…

Read more »

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Dividend Stocks

TFSA Investors: 1 Cheap Dividend Stock That Could Soar in 2025

This dividend-growth stock now trades at a discounted price and offers a 7% yield.

Read more »

Hand writing Time for Action concept with red marker on transparent wipe board.
Dividend Stocks

1 Dividend Stock Down 13% to Buy Right Now

Are you looking for a buy-the-dip opportunity? This dividend stock is down 13% and is a buy right now before…

Read more »