2 Dividend-Growth Stocks That Look Seriously Undervalued in January 2024

Alimentation Couche-Tard (TSX:ATD) stock and another top dividend play could help build dividend wealth through the decades.

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Dividend-growth stocks are some of the best ways to build impressive wealth over the course of many years. Sure, it’s more tempting to go for the higher-yielding plays that promise more passive income in the near term.

However, if you seek the best of both worlds (think growth and dividends), I believe that long-term investors ought to pay closer attention to the market’s top dividend growers. At the end of the day, the only thing better than a fat dividend (that may grow at a slower rate) is a relatively fair dividend that stands to grow by leaps and bounds.

So, if you’re a young investor who doesn’t need cash dividends (or distributions) to live off of, I’d encourage you to check out the market’s top-tier dividend-growth plays. Though some of them may not have the most bountiful payouts today, their stable growth trajectories could help build a dividend that stands to swell at a decent pace every single year. In that regard, I think dividend growth plays are a must-have for the core of any Tax-Free Savings Account, First Home Savings Account, or Registered Retirement Savings Plan.

Let’s check out two of my favourite dividend growers and see how they stack up in 2024 — a year that’s sure to see a good amount of bumps in the road.

CN Rail

CN Rail (TSX:CNR) is one of the stocks you should look to buy whenever shares head south in a hurry. Though macro circumstances and the firm’s high degree of economic sensitivity may have some hitting the panic button in certain instances, I believe that it’s tough to top shares of CNR when it comes to dividend-growth plays.

At writing, shares sport a 1.87% dividend yield — not at all competitive with most other high-yield dividend stocks out there. In any case, it’s unwise to ignore the dividend or the firm’s impressive dividend-growth profile. Even if 2024 sees a recession, investors can be ready for dividend raises. And when times are good, perhaps a bit more of a raise could be in the cards. In any case, CNR stock is one of the best dividend-growth stocks in Canada.

The longer you hold the stock, the more powerful the dividend factor comes into play! At $165 and change, I view the stock as a terrific deal, whether you’re a dividend hunter or a new investor looking to buy your very first stock.

Alimentation Couche-Tard

Alimentation Couche-Tard (TSX:ATD) isn’t exactly what you’d think of when you hear of dividends. The dividend yield sits at a mere 0.75% right now. Indeed, the main star of the Couche-Tard show is the capital gains potential. That said, Couche-Tard has been growing its earnings at an incredible pace over the past few years. And those earnings gains have translated into fairly frequent dividend increases.

So, while the sub-1% yield seems to suggest Couche-Tard is an appreciation play, I’d argue that it’s a magnificent dividend grower to hang onto for decades. In 15 years or more, the dividend will swell in size and help power a bountiful passive-income stream.

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 Joey Frenette has positions in Alimentation Couche-Tard and Canadian National Railway. The Motley Fool has positions in and recommends Alimentation Couche-Tard. The Motley Fool recommends Canadian National Railway. The Motley Fool has a disclosure policy.

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