TSX stocks that can sustain years (and even decades) of consecutive dividend growth are worthy of an investor’s attention. Dividend-growth stocks must have strong balance sheets, growing businesses, predictable earnings/cash flows, conservative management teams, and competitive advantages/moats.
While past dividend growth is not predictive of the future, it can demonstrate that a company operates with a certain prudence, efficiency, and productivity. If you are looking for some very successful dividend-growth stocks, these three should certainly be on your list.
Fortis stock: Half a century of dividend growth
No conversation about dividend growth in Canada would be complete without Fortis (TSX:FTS) stock. It has increased its dividend for 49 consecutive years. In 1972, it paid an annual dividend worth $0.0875 per share. Today, its annual dividend rate is $2.17 per share. That is a 2,380% increase!
Fortis operates 10 regulated businesses across North America. These are largely transmission and distribution utilities where it is an essential monopoly in its jurisdictions. The company provides safe and reliable service, and, in turn, it collects a predictable baseline of earnings.
This dividend stock expects to spend around $4.5 billion per year in capital growth projects. It believes this can lead to rate base growth of about 6% a year. At the same time, it expects to grow its dividend annually by 4-6%. It yields 4.15% today.
Brookfield Infrastructure: The potential to be a long-term dividend grower
Another utility-like dividend stock is Brookfield Infrastructure Partners (TSX:BIP.UN). It has been paying and growing its distribution ever since 2009 (14 years). In that time, it has grown its dividend by a 10.8% compounded annual growth rate.
Dividend growth has slowed to around 6% annually, but that is largely because it sees investment opportunities that could deliver better returns than a faster-growing dividend.
Brookfield owns a portfolio of defensive assets that include ports, railroads, pipelines, gas-processing facilities, utilities, cell towers, and data centres. These types of assets are economically essential. As a result, the majority are regulated or have long-term contracts. Over 75% of its earnings are contractually hedged to inflation, so this further protects the durability/consistency of its earnings.
Brookfield Infrastructure stock has fallen 17% over the past year. It trades with a 4.85% dividend yield, and its valuation looks attractive right now.
Granite REIT stock: A safe and steadily growing dividend
Granite Real Estate Investment Trust (TSX:GRT.UN) is another defensive stock to consider owning for dividend income. It has increased its dividend for 12 consecutive years. Its distribution today is over 300% larger than it was in 2011.
If you want exposure to high-end industrial real estate, this is the dividend stock to look at. It owns 128 logistics, manufacturing, and distribution properties across Canada, the U.S., and Europe. It also has an additional three million square feet of space under development.
Granite’s portfolio has a weighted average lease term of 6.7 years, and its portfolio is 99.6% occupied. Given its well-located properties, it has been enjoying elevated demand and strong lease rate growth.
The company has a very conservative balance sheet, so it should be able to grow its portfolio, cash flows per unit, and dividends for the foreseeable future. Granite stock yields 3.9% right now.
