If you want to increase your wealth over the long run, dividend-growth stocks are among the best assets you can buy. Offering regular cash flows that come in every quarter, they provide returns that can really add up over time.
Consistent dividend growth can signal long-term financial strength. A company can “fake” a dividend for a year or two (e.g., by borrowing money to make the payment), but that’s unlikely to be sustainable over several decades. So, if you’re looking at a company that has paid a dividend for several decades, you’re most likely looking at a real business. This does not mean that you’re going to get a great result, necessarily, but it does mean that you’re looking at something more than a fantasy football ticket. With that in mind, here are three dividend-growth stocks that could increase your wealth.
Fortis (TSX:FTS) is a Canadian utility stock that has raised its dividend every single year for 49 years. If it achieves just one more year of dividend growth, it will acquire the status of a Dividend King.
As a utility, Fortis has a very stable business. It has high barriers to entry that make it hard for new companies to enter its turf. It supplies an essential service that people don’t normally cut out of their budgets during recessions. Finally, it constantly invests in upgrades and expansion projects to improve its business and make it more profitable.
How is Fortis doing as a business?
Pretty well. In its most recent quarter, it delivered $0.68 in earnings per share, up 7% year over year. It completed $2.9 billion worth of capital expenditures and reported an increase in service usage. It was a good quarter, and Fortis may have more ahead of it.
Toronto-Dominion Bank (TSX:TD) is another Canadian dividend stock with a lot of dividend growth behind it. Unlike Fortis, it can’t claim that many years of consecutive dividend growth, because its dividend-growth streak got interrupted during the 2020 COVID-19 pandemic. However, it has mostly been raising its dividend since 1955.
TD Bank has been called “the most American of Canadian banks.” It earns about 36% of its profit from the U.S., where it has a large and growing retail business. Its most recent quarter was a smash hit, with earnings up 76% on paper, and 5% in adjusted terms. The bank is currently in the process of buying First Horizon and Cowen, two major U.S. investment banks. It could do very well in the years ahead.
Apple (NYSE:AAPL) is a stock with a very low yield but a strong dividend-growth track record. Over the last five years, Apple has grown its dividend by 8.2% per year. Can it keep up the dividend growth? Most likely, yes.
Apple pays out a tiny 15% of its earnings as dividends, and its earnings are growing by 14.5% per year. If the company’s earnings growth were to be cut by 33%, Apple could still afford to modestly grow its dividend by 8.2% per year going forward. And, of course, it has the world’s most valuable brand and an interconnected ecosystem of software and hardware that users can’t get enough of. It’s a stock worth holding — no doubt about it.