The TSX has several Canadian stocks, like Enbridge and Fortis, which have been paying and growing dividends for decades. Further, some are not as famous as Enbridge but have been consistently enhancing their shareholders’ returns through dividend payments and growth.
In this article, I’ll discuss three such underrated dividend stocks that are legends in the making.
These dividend stocks are part of the S&P/TSX Canadian Dividend Aristocrats Index. Moreover, they are well positioned to return substantial cash to their shareholders in the coming years.
Capital Power
Capital Power (TSX: CPX) is a wholesale power producer. It has an attractive average annual TSR (total shareholder return) of 14% since inception, higher than its long-term target of 10-12%. Capital Power has increased its dividend for nine consecutive years. Further, its forecasts a 6% average annual growth in its dividend through 2025.
Capital Power’s long-life assets, power-purchase agreements, and solid capital projects drive its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) and adjusted funds from operations and, in turn, its dividend payments.
Capital Power’s growing power-generation capabilities, policy support for its renewable power generation, and higher utilization augur well for growth. Moreover, its low target payout ratio of 45-55% is sustainable in the long term. It pays a quarterly dividend of $0.58 a share, translating into a dividend yield of 5.5% based on its current price levels.
goeasy
With a market cap of over $2 billion, goeasy (TSX: GSY) is a fundamentally strong dividend-paying company. It operates as a sub-prime consumer lender and offers products like unsecured and secured loans. Impressively, this financial services company has paid dividends for 19 years. Moreover, it has grown its dividend for nine consecutive years.
Its solid dividend payments are supported by robust sales and earnings growth. Its revenue and earnings sport a double-digit annual growth led by higher loan originations, solid credit and payments performance, and operating efficiency.
Looking ahead, the non-prime lender projects double-digit revenue growth, reflecting a continued increase in the consumer loan portfolio. Meanwhile, its solid credit portfolio and margin expansion will likely cushion its earnings and drive future dividend payments. Investors can earn a dividend yield of 3.1% by investing in goeasy stock. Further, goeasy has the potential to deliver solid capital gains in the long term.
CAPREIT
Canadian Apartment Properties REIT (TSX: CAR.UN), or CAPREIT, provides rental housing. The real estate investment trust (REITs owns about 67,000 residential apartment suites, manufactured home community sites, and townhomes across Canada and the Netherlands. CAPREIT pays a monthly dividend. Moreover, it has consistently increased its dividend since 2011.
Its growing portfolio bodes well for future growth. Moreover, the high occupancy rate, growing rents, and strong balance sheet with sufficient liquidity position it well to navigate the challenging operating environment. Also, its conservative debt metrics and well-managed mortgage portfolio are positives.
Through its capital investments, the company plans to drive its future earnings and cash flows and maximize shareholders’ returns through sustainable cash distribution. Investors can earn a dividend yield of 2.9% by investing in CAPREIT near the current levels.
