The Best Canadian Dividend Stocks: 2 Lower-Yield Stocks With High-Growth Potential

These two Canadian dividend stocks don’t offer that much of a yield, however, they are some of the best long-term growth stocks you can own.

| More on:
Business success with growing, rising charts and businessman in background

Image source: Getty Images

If you’re a dividend investor that’s looking for the best Canadian dividend stocks to buy, you might think that finding high-yield investments is a good way to go.

Don’t get me wrong. A high-yield stock can offer many advantages, as long as its dividend payments are safe and there’s no risk of the payout being trimmed in the near term.

However, when stocks pay a dividend with a higher yield, they are often paying out most or all of the cash they earned in the quarter. This can be great for dividend investors looking for a tonne of passive income.

But if you’re a younger investor with a longer timeline, it’s probably more beneficial to find a lower-yield dividend stock. Why? Because stocks that pay less to investors can keep more money to invest in expanding the operations and growing the business. And often, these companies can earn an impressive return on capital, which is why you invested your money in the first place.

So, if you’re looking for some of the best Canadian dividend stocks you can buy for your portfolio, here are two lower-yield stocks that could actually be some of your portfolio’s top performers.

A top Canadian convenience store and gas station operator

One of the top long-term growth stocks in Canada and a Canadian Dividend Aristocrat is Alimentation Couche-Tard (TSX:ATD.B), despite its low yield of just 0.7%.

If you’re buying Couche-Tard, though, it’s certainly not for the passive income it can offer, but more so because it’s one of the fastest-growing and most resilient companies in Canada.

Over the last 10 years, Couche-Tard has grown rapidly by acquisition, expanding its operations all over the world and earning investors a total return of more than 950%.

The company may have a low dividend yield, but it only pays out less than 10% of its operating cash flow. Plus, it spends between four and five times as much on capital expenditures.

And as long as Couche-Tard can continue to grow the business as well as the share price at such an impressive rate, this is clearly the most prudent use of capital. So, even though the stock doesn’t even yield 1%, Couche-Tard is still one of the best Canadian dividend-growth stocks you can buy.

The company reports earnings after the market closes today, so it will be interesting to see how it performed through the summer and what its guidance is for 2022.

Couche-Tard has a history of finding opportunities to grow no matter what the economic environment is like. So, I’d pay attention to its earnings, it could be an excellent opportunity to take a long-term position.

One of the best Canadian real estate stocks for dividend investors to consider

Another investment and one of the best Canadian dividend stocks to buy in the real estate sector is Canadian Apartment Properties REIT (TSX:CAR.UN). CAPREIT is a massive fund with over 65,000 sites and suites, giving it a tonne of resilience and safety.

Residential real estate is one of the best and safest industries to invest in, considering that people always need somewhere to live. So, the whole sector is extremely recession-proof. Plus, for a fund that operates in an industry that’s defensive, CAPREIT offers investors incredible long-term potential.

Over the last 10 years, the fund has managed to earn investors a total return of more than 300%, or a compounded annual growth rate of roughly 15%. That’s not only incredible, but it’s also been extremely consistent growth.

Canadian Apartment Properties has been taking advantage of low interest rates and expanding its portfolio considerably. This has led to a rapid increase in its net asset value. In addition, it’s also investing in upgrading its properties, which allows it to charge more for rents and increases its income.

And although it’s one of the best dividend-growth stocks to buy, as it’s also a Canadian Dividend Aristocrat, it still offers a lower yield of just 2.5%.

However, like Couche-Tard, CAPREIT invests a tonne of its capital in expanding its operations. So, as long as the fund can continue to grow investors’ capital at an impressive rate, it will continue to be one of the best Canadian dividend stocks to own.

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 owns shares of and recommends ALIMENTATION COUCHE-TARD INC.

More on Dividend Stocks

Dividend Stocks

Enbridge Is a High-Yielding Canadian Dividend Stock to Buy Now and Own Forever

Are you looking for a high-yielding Canadian dividend stock to buy? Enbridge (TSX:ENB) has plenty to offer investors.

Read more »

Retirees sip their morning coffee outside.
Dividend Stocks

Why I’d Buy These 2 Healthcare Stocks Today (Besides the Cheap $10 Price)

Two small-cap stocks trading under $10 worth buying right now as promising healthcare plays in 2023.

Read more »

Silver coins fall into a piggy bank.
Dividend Stocks

3 Dividend Stocks to Build Wealth in the New Year

These dividend stocks have proven they're set up for a strong future and have dividends you'll want to lock up…

Read more »

protect, safe, trust
Dividend Stocks

Retirees: These Dividend Stocks Come With Recession Protection

Retirees may be freaking out right now, but don't! Consider these high yielding dividend stocks for passive income while the…

Read more »

Dad and son having fun outdoor. Healthy living concept
Dividend Stocks

Parents: Max Out Your RESP Before the Dec. 31 Deadline!

Parents, make sure you're maxing out the RESP to get in on a government grant! Now is the time to…

Read more »

Gold bullion on a chart
Dividend Stocks

TFSA Investors: Why You Should Invest Your Room ASAP With These 3 Stocks

Choosing the right TFSA stocks for your portfolio might take some time. But with the right choices, you can stick…

Read more »

Target. Stand out from the crowd
Dividend Stocks

Here’s the Next TSX Stock I’m Going to Buy

Innergex is a TSX stock that is growing its revenue and earnings at an enviable pace. It also pays investors…

Read more »

A worker uses a laptop inside a restaurant.
Dividend Stocks

Got $500? 2 Stocks to Buy and Hold for at Least 5 Years

Given their multi-year growth potential and attractive valuations, I am bullish on these two TSX stocks.

Read more »