2 High-Powered Dividend Growth Stocks to Buy for 2023 and Beyond

Canadian Natural Resources may allocate 100% of free cash flow to stock investors soon, and exponentially grow dividends. Manulife Financial stock is another potential income growth play.

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Canadian dividend investors do not have to look far to easily boost their recurring quarterly income and enhance their chances of earning long-term double-digit total returns. To do so, buy high-powered dividend growth stocks on the TSX. Two of the best dividend growth stocks to buy in Canada include energy giant Canadian Natural Resources (TSX:CNQ) and growing insurance behemoth Manulife Financial Corporation (TSX:MFC). The two proven income growth stocks offer decent yields today, and their growing cash flows could support sustained dividend raises well beyond 2023.

Let’s take a closer look.

Canadian Natural Resources

Crude oil and natural gas producer Canadian Natural Resources is a dividend growth stock that keeps delivering good news to its long-term income-oriented investors. The $88 billion company raised its quarterly dividend by 6% on Thursday, March 2, 2023, to $0.90 per share. The latest dividend raise marked 23 years of consecutive annual dividend increases and follows another 13.3% increase announced in December last year.

CNQ is Canada’s largest oil producer, with low-decline assets and a strong balance sheet that has remained intact through commodity cycles. The company historically sustained its quarterly dividends through low-oil price regimes and could retain its reputation in the next. The dividend looks sustainable given a low earnings payout rate of under 30% during the past 12 months.

Most noteworthy, Canadian Natural Resources maintains a shareholder-friendly capital management policy. Indeed, it rewards investors with special dividends during oil-price booms, religiously raises dividend payouts, and aggressively repurchases CNQ common stock as oil prices skyrocket.

CNQ’s share count has dropped by 10% over the past five years. The board has approved another 10% reduction through stock repurchases over the next 12 months. Long-term investors have a growing share in the company’s growing earnings and cash flows.

Interestingly, during the company’s fourth quarter 2022 earnings on Thursday, CNQ management enhanced its free cash flow allocation policy this month. Specifically, it will allocate 100% of free cash flow to incremental shareholder returns when net debt reaches $10 billion. Net debt had declined 50% in two years to $10.5 billion by December 31, 2022.

Dividend investors should buy and hold this fired-up dividend stock beyond 2023 to receive recurring free cash flow windfalls. They are most likely coming.

The recently raised CNQ stock dividend should yield 4.5% per annum.

Manulife Financial Corporation

Life insurance behemoth Manulife Financial Corporation (TSX:MFC) stock remains a high-powered and attractive blue-chip stock to buy for income-oriented investors, even after Manulife stock price has risen 12% so far this year.

The $50 billion company recently raised its quarterly dividend by 10.6% in February to mark nine consecutive years of uninterrupted annual dividend increases. The new Manulife stock dividend should yield 5.4% annually if you buy shares near the current Manulife stock price of $27.10 a share today.

Manulife reported a strong 21% year-over-year surge in attributable net income for 2021 to a record $7.1 billion. The company sustained its new profitability run rate in 2022 as it generated $7.3 billion in net income attributable to its shareholders. The business is growing internationally and earning more money as consumers go digital. Notably, it enjoys a growing client base in a budding Asian market where a growing middle class means serious business for the household name.

Investors should expect Manulife to keep raising dividends as it expands its global operations, earns growing profits, and buys back its common stock, as it has done over the past half-decade

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 Brian Paradza has no positions in any stocks mentioned. The Motley Fool recommends Canadian Natural Resources. The Motley Fool has a disclosure policy.

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