2 TSX Stocks That Keep Raising Their Dividend Payouts

Dividend appreciation is reason enough to buy certain Dividend Aristocrats, but they might be no-brainer buys if they also help keep growing your capital ahead of inflation.

| More on:
growing plant shoots on stacked coins

Image source: Getty Images

Dividend Aristocrats, also counted among the blue-chip stocks, are safe choices. But the right Aristocrats offer so much more than safety endorsed through their industry leadership position and financial stability. They may also offer growth potential to match their dividend increments. This way, your income and your capital invested in the company can both stay ahead of inflation.

A utility company

Utility stocks have an additional layer of safety — their business model. Utilities are among the most necessary expenses for most individuals/consumers, which makes their financials quite healthy. Since utilities are a permanent necessity, the stocks also tend to be more resilient to market headwinds.

Fortis (TSX:FTS) stands out even among the other utility stocks in Canada. As the second-oldest Aristocrat in the country, it’s merely a year away from becoming Canada’s second Dividend King. The company has raised its payouts for 49 consecutive years and plans on continuing this, and the projections for the next few years (till 2027 at least) suggest a yearly payout growth between 4% and 6%.

It’s currently offering a 3.8% yield. The stock is modestly overvalued and has a history of steady growth. In the last decade, the stock has risen by about 76%. The 7.6% annualized growth has been more than enough to counteract the impact on inflation during this period.

Considering its solid dividend history, stable payout ratio (about 75%), and healthy financials, it seems highly unlikely that the company will slash or suspend its payouts anytime soon.

A railway company

Canadian National Railway (TSX:CNR) is among the top stocks currently trading on the Canadian stock market as well as one of the country’s largest (by market capitalization) companies. With a century of history backing up its services to the country and an impressive railway network that connects three major North American ports, it can be considered a relatively safe investment.

It’s also a good pick if you analyze it from an ESG (environmental, social, and governance) investing perspective. It has taken several measures to reduce its emissions and gets ESG points for transporting cargo associated with renewables and clean energy sources.

The company also offers a wide range of supply chain and logistics services and has its own massive trucking wing, which allows it to expand its presence far beyond its rails. It’s also a powerful growth stock.

The stock has risen about 209% in the last 10 years, and if we add the dividends, the overall returns rise up to 266%. The company doesn’t get a lot of points for its yield, which is 1.9% right now. But its position as a Dividend Aristocrat is quite strong.

After growing its payouts for 27 consecutive years, the company has already entered the list of U.S. Dividend Aristocrats as well, where the criterion is much more stringent than it’s in Canada. The dividends are backed by a very healthy payout ratio of 38%.

Foolish takeaway

The two companies offer you a healthy mix of capital appreciation and dividend growth. As blue-chip stocks with safe business models, they are also relatively safe long-term investments. So, diverting a healthy amount of capital to the two companies and holding them for a decade or two might be a viable investment strategy.

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 Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends Canadian National Railway and Fortis. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Dividend Stocks

Enbridge Stock: This Dividend Aristocrat Looks Like a Steal in 2023

Here are some key factors that make ENB a great Canadian dividend stock to buy on the dip in 2023.

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

U.S. Debt Ceiling: Is It Safe to Invest Right Now?

The U.S. debt ceiling is in the headlines again. You can play it safe by investing long term in wonderful…

Read more »

analyze data
Dividend Stocks

How to Invest $20,000 to Make Ultra-Safe Passive Income

Got $20,000 to invest for passive income? These three stocks are perfect for earning ultra-safe passive income for the long…

Read more »

A close up image of Canadian $20 Dollar bills
Dividend Stocks

For Passive Income: How to Turn $25,000 Into $158 Per Month

High-yield, monthly dividend stocks trading on the TSX such as Slate Grocery can help you earn a predictable stream of…

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

2 Canadian Dividend Stocks to Buy for Consistent Passive Income

These top dividend stocks have raised their distributions annually for more than two decades.

Read more »

Piggy bank next to a financial report
Dividend Stocks

Self-Directed RRSP: 2 Top Dividend Stocks to Buy in June 2023

These top TSX dividend stocks look cheap to buy today and offer attractive dividend yields.

Read more »

Dividend Stocks

Looking for Reliable Retirement Income? Consider These Dividend-paying Stocks

National Bank of Canada and another reliable income stock that could be a perfect fit for your retirement fund this…

Read more »

grow money, wealth build
Dividend Stocks

Are You Looking for High-Yield Investments? 3 TSX Stocks That Offer Excellent Payouts

These dividend stocks all offer solid payouts, as well as yields in the five to six percent range. So get…

Read more »