If you have decades until retirement, these top dividend stocks could help turbocharge your Tax-Free Savings Account (TFSA) returns and retirement income. These stocks have a track record of high dividend growth in the long run as well as outperformed the Canadian stock market returns over the last 10 years.
The iShares S&P/TSX 60 Index ETF is used as a proxy for market returns. It delivered annualized returns of 8.6% in the last 10 years according to YCharts. In other words, XIU turned an initial $10,000 investment into about $22,740.
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goeasy stock
goeasy (TSX:GSY) is a leading non-prime Canadian consumer lender. In late March, the Government of Canada announced its intent to reduce the maximum allowable interest rate to 35% per year, which would have less of an impact on goeasy than smaller-scale peers. This news added to the weight that already came from a higher uncertainty, higher interest rate environment, driving the stock to as low as $87 per share. Since then, the stock has recovered approximately 44%.
goeasy is a Canadian Dividend Aristocrat with a respectable 15-year dividend growth rate of 18.6%, even though it maintained the same common stock dividend from 2009 to 2014. Its trailing-12-month payout ratio was 37% of earnings. And it has remained profitable through economic cycles. Though at times, it could experience large declines in earnings such as around the time of the global financial crisis.
It has been a super outperformer, delivering annualized returns of 29.8%, in the last 10 years. In other words, the stock turned an initial $10,000 investment into about $135,660 in a decade!
At $125.57 per share at writing, goeasy stock offers a dividend yield of close to 3.1%. Analysts also believe the undervalued stock trades at a discount of 23% to the consensus 12-month price target. goeasy management also forecasts operating margin expansion to about 38% and a high return on equity of 21% through 2025. The growth stock has a chance of delivering returns of more or less 12-15% per year over the next five years.
XIU, GSY, and ATD Total Return Level data by YCharts
Alimentation Couche-Tard
In comparison, the leading global convenience store and road transportation fuel retailer, Alimentation Couche-Tard (TSX:ATD) has been a smoother ride as an outperformer. So, it may be a good strategy to accumulate shares in Couche-Tard over time. For example, you can save and invest regularly using commission-free trading platforms like Wealthsimple.
The consumer discretionary stock delivered annualized returns of 20.9% in the last 10 years. To put it in perspective, the stock turned an initial $10,000 investment into about $66,680 in a decade. Like goeasy, Couche-Tard is a Canadian Dividend Aristocrat with a 15-year dividend growth rate of 23.1%.
Management strategically allocates capital across its global network development, commercial programs, maintenance and improvements, and emerging business and innovation. In its June presentation, it noted that from fiscal 2012 to 2022, the company converted 45% of its earnings before interest, taxes, depreciation, and amortization (EBITDA) to free cash flow, and 41% in fiscal 2023.
At $67.15 per share at writing, Couche-Tard stock offers a puny dividend yield of 0.8%. However, analysts believe the stock is discounted by 15%. Continued execution by the quality management team could lead to annualized returns of more or less 12% over the next five years.
