2 Dividend-Growth Stocks With Double-Digit Growth Rates

Dividend-growth stocks like goeasy (TSX:GSY) should be on your watchlist as inflation soars.

| More on:
Upwards momentum

Image source: Getty Images

Inflation is so high right now that most dividend stocks offer negative real returns. In 2022, if your portfolio generates 3% in income, and inflation is 7.6%, you have lost 4.6% of your purchasing power. 

This is why investors need to focus on stocks that offer high dividend yields and robust dividend growth. That’s the only way to preserve purchasing power in this environment. Here are the top two stocks with double-digit growth rates. 

Dividend-growth stock #1 

goeasy (TSX:GSY) isn’t an obvious choice in this environment. The stock has taken a beating this year as interest rates continue to rise. The move could impact the company’s core business, which revolves around subprime loans.

While the company operates two distinct businesses, its core business revolves around providing high-interest loans to subprime borrowers. In addition, it also offers furniture and other home goods on a rent-to-own model. The diversified nature of the business has allowed the company to grow record revenues over the past few years.

The company has seen stellar demand for its offerings, especially in the subprime sector, leading to double-digit growth in revenue and earnings. In addition, the company has experienced massive growth, resulting in an earnings-per-share growth rate of about 29%.

goeasy is a solid play for passive income, as it has increased dividends in the last eight years. Its dividend has grown at a compound annual growth rate of 34.5%, leading to a high dividend yield of 3.25%. Consequently, it is an ideal play for any investor looking to outpace inflation.

The stock is down 30% year to date and by about 40% from its 52-week high. It’s now trading at a price-to-earnings multiple of 13, which is at a three-year low. Put simply, the bad news about higher interest rates and growing defaults may be priced in already. Keep an eye on this opportunity. 

Dividend-growth stock #2

The utilities sector is a comparatively safer pool for dividend investors. Algonquin Power & Utilities (TSX:AQN)(NYSE:AQNA) is an excellent dividend-growth stock in this space. 

Over the years, Algonquin Power & Utilities has registered robust growth in its core utility and renewable energy divisions. The recent quarter reflects the company’s ability to withstand inflationary pressures. 

Revenue in the quarter was up 18% from a year ago to $624.3 million, as adjusted earnings increased 19.6% to $109.7 million. Adjusted funds from operations increased 12% to $180.3 million.

The stellar financial results underscore why Algonquin Power & Utilities is a safe bet for worry-free passive income. The company boasts of an impressive dividend-growth history of 12 years supported by a solid business capable of generating significant free cash flows. 

Algonquin Power & Utilities pays an impressive 5.12% dividend yield, allowing investors to generate some passive income. 

Management has already confirmed plans to increase dividend payout backed by growing net income. Earnings are expected to grow at a compound annual growth rate of 7-9%. Meanwhile, revenue has expanded at an annual rate of 21.5% over the past five years. 

Algonquin Power & Utilities stock is trading at a discount with a price-to-earnings multiple of 16 compared to an average of 30 for the utility sector. That makes it an ideal target for dividend-growth investors.

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 Vishesh Raisinghani has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

More on Investing

online shopping
Investing

2 Top TSX Retail Stocks to Buy in October

My two top TSX retail stocks to buy in October are Aritzia (TSX:ATZ) and Dollarama (TSX:DOL).

Read more »

money cash dividends
Dividend Stocks

Want Passive Income: Hold This Canadian Dividend Growth Stock Forever

Passive income seeking investors can now buy shares of dividend-paying blue-chip companies at a discount, such as Brookfield Infrastructure.

Read more »

Modern buildings in business district
Bank Stocks

TD and CIBC Stock: 2 Top Banks to Buy for Big Yields

TD Bank (TSX:TD)(NYSE:TD) stock is a dividend juggernaut that's a must-buy for its cheap yield.

Read more »

Gold bars
Metals and Mining Stocks

Gold Stocks That Could Soar if the Fed Pauses Rate Hikes

In choppy waters, two gold heavyweights look too good to pass up right now given their lowered entry points, dividend…

Read more »

Clean energy
Energy Stocks

Better Buy: Renewable Energy or Uranium Stocks?

The world is shifting towards clean energy sources, creating investment opportunities in the renewables sector. What's a better bet: environmental…

Read more »

retirees and finances
Energy Stocks

These 3 Stocks Can Help Make You Richer by Retirement

Future retirees can be rich in their sunset years with the help of three distinguished dividend-payers on the TSX.

Read more »

A worker uses the cloud for paperless work. tech
Tech Stocks

Why I Think Constellation Software (TSX:CSU) Stock Has Market-Beating Potential

Constellation Software (TSX:CSU) could outperform the market over the next few years.

Read more »

data analytics, chart and graph icons with female hands typing on laptop in background
Investing

Got $5,000? These Are 2 of the Best TSX Growth Stocks to Buy Right Now

Canadian investors with some extra cash on hand should look to snatch up TSX growth stocks like goeasy Ltd. (TSX:GSY)…

Read more »