Dividend-growth investors should narrow their focus on the best dividend-growth plays in the market. Undoubtedly, it’s nice to have a diversified portfolio as a new investor who’s looking to steer clear of single-stock risk. However, too much diversification can be a bad thing, especially if you’ve got north of 20 stocks that you can’t really keep up with.
Undoubtedly, mutual funds, index funds, and various ETFs (exchange-traded funds) are great set-and-forget types of investments that can help you instantly diversify across the broad market. If you can’t beat the market, might as well join them, right?
When it comes to the Canadian market (the TSX Index), I believe that today’s young investors can not only beat the TSX but put it to shame without bearing an obscene amount of risk. If anything, the TSX Index’s skewed sector weighting (think financials and energy) makes it more vulnerable to sector-based risks. Indeed, if oil prices head south, the TSX Index may have a tougher time moving higher.
Though energy names are a great addition to any diversified portfolio, I’d argue that Canadians should seek less cyclical names at the core of their TFSA (Tax-Free Savings Account) portfolios.
Preferably, dividend-growth rockstars are an intriguing addition to any long-term TFSA growth fund. And in this piece, we’ll have a very quick look at two that I’d dub as rockstars — ones to be held for the coming decades.
Restaurant Brands International
First, we have Canadian fast-food firm Restaurant Brands International (TSX:QSR), which pulled back nearly 2% on Monday’s session, as the quick-serve restaurant plays slid. Indeed, inflation seems to have caught up to the fast-food firms, and though value menus can still beckon hard-hit consumers, recent price hikes may have deterred some. It’s far cheaper to eat from home, after all — at least these days.
Despite the recent pressures, I still think QSR stock is destined for higher highs as it closes out 2024. The firm seems unstoppable, given the recent momentum in Burger King and strategic investments to bring out the power of the brands (especially Burger King and Tim Hortons). With a juicy 2.75% dividend yield, I’d look to be a buyer of any meaningful dips on the back of recent fast-food industry woes.
At the end of the day, Restaurant Brands is in full-on growth mode, and its dividend is likely to trend higher over time as management continues working its magic. The past five years of performance (26% gains) seem less remarkable. However, I believe the next five years will be a heck of a lot more prosperous as QSR looks to keep its newfound momentum going strong.
Rogers Communications (TSX:RCI.B) is another great dividend play to hold for the long run. Though its dividend yield pales in comparison to most other telecom darlings, I’d argue Rogers’s growth profile looks most impressive following its Shaw Communications acquisition — a move that puts even more power into the telecom titan’s hands.
With a 3.14% dividend yield and momentum on its side since the market bottomed last autumn, I’d look to average into a full position now and over time. Rogers is an underdog that could begin to outpace its peers in 2024 and beyond.