Canadian inflation slowed to 3.1% for October 2023. The Bank of Canada predicts inflation to average around 3.5% in 2024. The cost of living is still rising, though at a slower pace than it did in 2022. Individuals need an income raise for 2024, and the good news is that a good number of Canadian dividend stocks have already raised their annual payouts for the next year, cushioning investors from losses.
In focus are three Canadian dividend growers that raised their quarterly payouts in November 2023 at rates far above anticipated inflation.
Quarterly dividends from Suncor Energy (TSX: SU), Cogeco Communications (TSX: CCA), Canadian Natural Resources (TSX: CNQ) will grow at rates above inflation in 2024.
A strong commitment to increasing payouts and strong cash flow generation make some of the stocks best buys for passive-income growth in 2024. Let’s take a closer look.
Suncor Energy stock makes a 5% dividend raise
Suncor is busy mending its relationship with income-oriented investors. The $58 billion integrated energy stock will pay a $0.545 per share quarterly dividend on December 22 — a 4.8% raise from the previous dividend paid in August 2023. Suncor announced its latest dividend raise on November 14 — its fourth dividend increase during the past 24 months.
Management has buried a 55% dividend cut during an unprecedented crisis in 2020, and Suncor has raised its quarterly dividend by 160% from the 21 cents per share last paid in September 2021. The new payout should yield 4.9% annually to investors who acquire SU stock under $45 a share today.
Should you buy Suncor stock for the dividend? The company’s new management is focused on impressing shareholders, and recent dividend raises are a testament to investor-friendly capital-budgeting policies. Suncor’s dividend looks safe, as it is still well covered by free cash flow, given a free cash flow payout rate of 46.4% over the past 12 months.
To receive the first payout of Suncor stock’s raised dividend, investors must buy shares before December 1, 2023.
Cogeco Communications stock’s dividend grows 10% higher
Media company Cogeco Communications raised its quarterly dividend by 10% to 85.4 cents per share on November 1, 2023, while the dividend on Cogeco Inc. stock (the controlling shareholder in Cogeco Communications) increased 16.8% year over year to match. The latest dividend increase marked 20 years of consecutive dividend growth for Cogeco Communications stock.
Management’s three-year process to match the two related stocks’ quarterly dividends has finally closed their dividend gap. The dividend yields on Cogeco Communications (CCA) stock and on Cogeco Inc. (CGO) stock rise to 6.6% and 7.3%, respectively, for investors who acquire shares at current prices around $52 and $47 a share.
The high yields look appealing. However, revenue growth could drop to zero in 2024, as intense competition from fixed wireless operators and ongoing cord-cutting in the United States offsets single-digit revenue growth in Canada. Given higher interest costs post-rate hikes in 2022, Cogeco’s earnings and free cash flow may shrink in 2024.
Investors are pricing the absence of growth and the risk of shrinking earnings. Cogeco Communications’s stock price has declined by 45% over the past three years. New investors should beware the risk of further capital losses, which may negate the allure of Cogeco’s bloated dividend yield.
Canadian Natural Resources stock: Should you buy for an 11% dividend raise?
True to its goal of distributing more cash flow to investors, Canadian oil and gas giant Canadian Natural Resources increased its quarterly dividend sequentially by 11% to $1 a share on November 2. To be eligible for the company’s upcoming dividend payout on January 5, 2024, you may buy CNQ stock before the record date of December 8, and expect to earn a 4.5% yield for 2024.
Canadian Natural Resources took advantage of strong oil prices to reduce net debt on its balance sheet and handsomely reward its loyal shareholder base. Considering an earlier dividend raise in March, CNQ has raised its dividend by 17% this year, and the Canadian Dividend Aristocrat boasts 24 consecutive years of dividend growth.
Oil prices will remain naturally volatile in 2024, and Bay Street analysts expect CNQ to grow its free cash flow by 22% to more than $10 billion next year. Dividends remain well covered, and the energy stock remains worthy of investing for regular income.
