Dividend investing can help you achieve financial independence. In theory, by investing in dividend stocks, an investor would be able to supplement and eventually replace their primary source of income. Because of this constant income, investors can receive some cash every quarter without having to sell any shares. This allows the investor to be rewarded for holding a stock, while giving positions sufficient time to grow. In this article, I’ll discuss three great dividend stocks to consider for your portfolio.
This dividend stock is growing on all fronts
Many growth investors will argue that dividend stocks don’t appreciate fast enough and will stay away from them for that reason. However, if you look in the right places, you could find dividend stocks that outperform even the best growth stocks. One example would be goeasy (TSX:GSY). The company provides high-interest loans to subprime borrowers and sells furniture and other home goods on a rent-to-own basis.
Aided by the pandemic, goeasy recorded record-breaking numbers over the past year. Investors were clearly watching goeasy very closely through the pandemic and were impressed by its performance. Over the past year, goeasy stock has gained 228%. Even more impressive is its dividend. Since 2014, goeasy’s dividend has increased 776%! A true Dividend Aristocrat with an outstanding growth profile, goeasy is one stock you should consider adding to your portfolio.
This industry is a Canadian favourite
When it comes to investing, many Canadians will turn to the banking industry. The reason for this widespread affinity towards the Canadian banking industry is its highly regulated nature. This makes it more difficult for smaller companies to displace the industry leaders, giving those companies a secure position atop of the industry. Of the leaders within the Canadian banking industry, my top pick remains Bank of Nova Scotia (TSX:BNS)(NYSE:BNS).
Unlike its peers, Bank of Nova Scotia hasn’t focused all its assets in North America. Instead, it has decided to expand into the Pacific Alliance. This is a region which includes Chile, Columbia, Mexico, and Peru. Although that exposes the company to geopolitical risks, it could be a tremendous growth opportunity. Bank of Nova Scotia is also a Canadian Dividend Aristocrat, growing its dividend for the past 10 years. Bank of Nova Scotia offers a forward dividend of 4.59% with a payout ratio of 58%. This company is positioned to be a top dividend stock for years to come.
Choose a stock with a strong history of increasing dividends
One way that investors should screen dividend companies is by looking at dividend-growth streaks. Companies with management capable of intelligently allocating capital over long periods will always come out ahead of peers with weaker management teams. This is important to consider, because it signals to investors that a company’s dividend is sustainable. For example, take a look at Fortis (TSX:FTS)(NYSE:FTS). It holds the second-longest active dividend-growth streak in Canada at 47 years.
The secret behind Fortis’s success stems from the industry it operates in. The company provides regulated gas and electric utilities to 3.4 million customers across Canada, the United States, and the Caribbean. Because it provides such an essential service, Fortis’s business doesn’t experience many difficulties during economic downturns. As a result, this stock has been able to increase its dividend, despite the many periods of economic uncertainty that have occurred over the past five decades.
