Investing is never entirely free from stress, but you can build a dividend stock portfolio that does mitigate stress. When you retire, you want to think about the golf course (or whatever makes you happy), not your investments. So, an ideal strategy is to buy high-quality stocks that you can set and forget.
Look for steady earnings growth for reliable dividend growth
The key to this strategy is to look for stocks with sustainable, growing earnings that also support sustainable, growing dividends. A high dividend yield (+8%) might seem tempting. However, excessively high yields often indicate problems in a business and that the dividend is not sustainable.
That is why a lower dividend yield that is growing at an attractive pace can present a better risk/reward scenario. If you are looking for some lower-stress dividend investments, here are three to have on your radar.
A top real estate stock
Granite Real Estate Investment Trust (TSX:GRT.UN) is one of the most defensive real estate stocks you can buy. It owns 142 high-end industrial and logistic properties across North America and Europe. The properties have +99% occupancy, long-term lease (+6-year average lease term), and largely investment grade tenants (like Amazon, Walmart and Magna).
Granite stock earns a 4.4% distribution yield. It has grown its dividend annually for over 10 years. This dividend stock has a payout below 80%. That indicates that its current distribution is safe.
For a REIT, Granite has an excellent balance sheet with a debt-to-equity ratio around 30%. While interest rates are rising, Granite’s rents have been rising at an even faster pace. Investors could continue to enjoy mid- to high single-digit growth ahead.
A top transport stock for growing dividends
Canadian National Railway (TSX:CNR) has been delivering a steady stream of growing dividends and solid capital returns for decades. While economic worries have temporarily pulled the stock back, it may present an opportunity to buy this stock at a more attractive valuation.
Canadian National has an exceptional network that spans across Canada and down through America. It is a crucial engine for moving goods in the North American economy. Over long periods of time, it has persistent pricing power and strong competitive moat.
CNR stock only pays a 2% dividend. However, it has grown that dividend by a +12% annual pace. With a payout ratio of 40%, CNR can afford to invest in its network, steadily grow its dividend, and buyback stock. CNR stock has an attractive formula for long-term total returns.
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A health stock with a rising dividend
Go to any grocery store and you will see its prominent position. After the COVID-19 pandemic, people are increasingly aware of preventative health and that should be a tailwind for Jamieson.
Jamieson recently made a major acquisition in the U.S., and it created several investment and distribution partnerships in China. These are some of the largest supplement markets in the world and could fuel longer-term growth opportunities.
Jamieson yields 2.25% today. Likewise, it trades with a price-to-earnings ratio of 20, which is the lowest it has been in five years.
It has grown its dividend by a 19% compounded annual growth rate since its initial public offering. It has a payout ratio of 40%, which indicates that it can afford to invest in growth and likely increase its dividend as well.