Canadian Utilities Is a “Dividend King,” But I Like This Stock Even More

Canadian Utilities (TSX:CU) stock is a solid dividend provider, but there’s more to look at then just how much you’re paid in passive income.

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There aren’t a lot of companies out there that increase their dividend as much as Canadian Utilities (TSX:CU). In fact, it’s currently the only company on the TSX today that’s increased its dividend each year for the last 50 years!

This is certainly a great reason to consider the dividend stock, and if you already own it, I’m certainly not recommending you sell it. However, there is another dividend stock I like even more right now.

Why not Canadian Utilities

If you’re investing purely for dividends, then Canadian Utilities stock might not actually be your best option. Sure, you can look forward to a growing dividend each year, and that’s great. However, how much is that dividend growing in actuality?

Canadian Utilities stock currently has a compound annual growth rate (CAGR) of 6.3% for the last decade. That certainly isn’t a bad amount to grow each year. That dividend now comes out at $1.79 per share on an annual basis.

As for share price, however, that’s where things get a bit more shaky. Over the last decade, there has been a lot of up and down for shares of this dividend stock — so much so that shares are actually down 4% … in a decade!

That’s why I wouldn’t necessarily recommend this Dividend King. Sure, it has solid passive income coming your way. But is that really helpful if your returns aren’t doing a thing?

Consider this instead

Right now, there is a deal to be had when it comes to Canadian banks. Yet of them all, I really like Bank of Montreal (TSX:BMO) — especially when it comes to dividends.

BMO stock is the oldest of the Big Six banks, having been around for over 200 years. In that time, the company has managed to expand quite rapidly. In fact, it managed to do that again recently, where it now operates in the United States after acquiring Bank of the West.

BMO stock also offers value as a Canadian bank, as it’s part of the Canadian banking oligopoly. There just isn’t the competition that we see in other areas of the world. Because of this, it continues to have provisions for loan losses to help the company bounce back from economic downturns like this one.

That makes BMO stock that’s a steal among dividend stocks. It trades at 5.87 times earnings, with shares down 15% in the last year. However, shares are up 94% in the last decade. This brings it a CAGR of 6.9% in the last decade.

As for its dividend, it holds a yield at 5.03% as of writing. That dividend has risen by a CAGR of 7.4% in the last 10 years! So, you’re getting more growth, both in terms of passive income as well as share price.

Bottom line

It’s definitely best to consider everything before picking up a dividend stock. While Canadian Utilities stock certainly has a lot going for it in terms of passive income, it doesn’t when it comes to actual returns. Meanwhile, BMO stock has solid growth in terms of both dividends and returns as well as a possible huge turnaround when the market recovers.

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 Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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