When companies raise their dividends, it is often taken as a vote of confidence from management, who see the company’s profit rising in the future. Sometimes, management raises dividends for the wrong reasons, but in general, it makes sense to see dividend hikes as bets on a company’s strong future.
Dividends are not without cost. Any dollar spent on them is a dollar not re-invested into the business. So, it’s ambiguous, absent other information, whether a dividend hike is a good thing. Nevertheless, a company increasing its dividend is certainly a fact that investors will want to know about. With that in mind, here are three Canadian stocks that raised their dividend payouts recently.
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Telus
Telus (TSX:T) recently increased its dividend from $0.3636 to $0.3761. That’s a 3.4% hike. Nothing too major, although the company recently announced that it was pivoting to a semi-annual payment schedule. So, perhaps there’s still another hike in the pipeline that will take the total dividend increase for 2023 to a more substantial percentage.
Telus’s performance this year has been so-so. The company’s revenue increased 7.5% in the most recent quarter, while its net income declined 75%. As a telco, Telus has a lot of debt, and interest on that debt is rising with today’s ever-rising interest rates. It’s a major problem, but at this point, T stock has been beaten down so badly that it now yields 6.21%. It may be worth the price of admission based on valuation alone.
Canadian Utilities
Canadian Utilities (TSX:CU) is, as the name implies, a Canadian utility stock. It last declared a dividend on November 1, when it said that its dividend for the upcoming quarter would be $0.45 per share. That was a 1% dividend increase compared to the same quarter a year before.
Canadian Utilities stock has delivered a mixed performance for its investors over the years. Its stock is actually down 15% over the last five-year period, but its earnings have grown by 7.5% in the same period. It hasn’t been a bad performance in terms of fundamentals. While CU is certainly no Fortis in terms of consistency, it is one utility whose recent dividend raise may be counted as a blessing to shareholders.
BMO
Bank of Montreal (TSX:BMO) is a Canadian bank stock that recently increased its dividend by 8%. It recently concluded the $13.5 billion buyout of Bank of the West, a major California lender that will increase BMO’s U.S. presence significantly.
The bank’s most recent quarter was a major success, with revenue up 25% and earnings up 6.4%. At today’s prices, BMO stock yields 5.34%. That’s among the highest yields available on TSX banks today. BMO invests in growth a lot more than Canadian banks typically do; as a result, it now has a major presence in U.S. retail and investment banking. It’s a financial services company worth owning for the long term.
Foolish takeaway
What a year 2023 has been for dividend stocks. We started off this year with most economists calling for a recession, and now we’ve got companies hiking their dividends left, right, and centre. Who knows what the future will bring? But it sure looks bright for the three companies just mentioned.
