Beat the TSX With This Cash-Gushing Dividend Stock

This dividend stock can easily surpass the TSX today, but even more growth is likely to get back to all-time highs, with a huge dividend while you wait.

| More on:
Various Canadian dollars in gray pants pocket

Image source: Getty Images

Yes, it’s possible. While nothing in the stock market is guaranteed, there is certainly the possibility to beat the TSX with a dividend stock — that is, if it’s the right dividend stock.

After all, beating the TSX today isn’t an easy feat. The index holds a compound annual growth rate (CAGR) of about 4% in the last decade. So, what you’ll need to find is a company that can offer to give you that not just through dividends but returns as well.

What to consider

If you want to beat the TSX, the best option you can choose is to invest in a dividend stock. These companies offer you steady streams of income, with the ability to also take advantage of compounding. You can simply reinvest those dividends to allow your compounding investment to increase even more over time. This can achieve even more returns than just investing an amount only once.

Furthermore, dividend-paying companies have a history of lower volatility. These are usually more established businesses that tend to stick to a certain yield that investors can depend on. But that can also change on a dime.

Consider the oil and gas industry. This was supposed to be the go-to sector for long-term income. Now, we’re looking elsewhere. This is why the next oil and gas sector should easily be renewable energy.

Consider this stock

If you want to beat the TSX today, then you’re going to want a high-yielding dividend stock with a long history of dividend growth. That’s why I would consider Northland Power (TSX:NPI). NPI stock is perfect as it focuses on clean energy, with resources including wind, solar and more. It operates around the world, including in Asia, Europe, Latin America, and, of course, Canada and the United States.

This global reach spreads out risk and allows for more stable cash flow. These come from long-term contracts, with even more project development coming down the pipeline. What’s more, the company is a solid dividend provider, increasing it for the last eight consecutive years.

Recent earnings, more growth

During the most recent earnings report, NPI stock reported higher-than-expected earnings per share, reaching $1.13 for the quarter. This was double what analysts had expected. Furthermore, it generated cash flow of $234 million, with a focus on growth for its key projects. While year-over-year earnings per share were down, and it reported a net loss, there was hope given fourth-quarter earnings.

Overall, NPI stock looks like a strong company to consider for long-term growth. Renewable energy continues to be a huge field of investment for many. And NPI stock offers a diverse range of products all around the world. What’s more, it’s positioned for even more growth, with construction progressing for various projects. Plus, as interest rates and inflation fall, it will be easier for the stock to turn a profit.

Bottom line

NPI stock is a solid stock offering a 5.2% dividend yield as of writing. That’s also dished out monthly for even more opportunities to create compound interest. That’s also higher than the performance of the TSX! So, even if NPI stock stays still, you’ll be earning more. But over time, NPI stock has a CAGR of 3.7% as of writing. And that comes after a huge drop in all-time highs. So, we could see an increase in share price surge in the next few years. Meanwhile, you’ll still be beating the market with this cash-gushing dividend stock.

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 Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Dividend Stocks

hand using ATM
Dividend Stocks

Should Bank of Nova Scotia or Enbridge Stock Be on Your Buy List Today?

These TSX dividend stocks trade way below their 2022 highs. Is one now undervalued?

Read more »

A meter measures energy use.
Dividend Stocks

Here’s Why Canadian Utilities Is a No-Brainer Dividend Stock

Canadian Utilities stock is down 23% in the last year. Even if it wasn’t down, it is a dividend stock…

Read more »

edit Business accounting concept, Business man using calculator with computer laptop, budget and loan paper in office.
Dividend Stocks

Got $5,000? Buy and Hold These 3 Value Stocks for Years

These essential and valuable value stocks are the perfect addition to any portfolio, especially if you have $5,000 you want…

Read more »

Growing plant shoots on coins
Dividend Stocks

3 Magnificent Ultra-High-Yield Dividend Stocks That Are Screaming Buys in April

High yield stocks like BCE (TSX:BCE) can add a lot of income to your portfolio.

Read more »

grow money, wealth build
Dividend Stocks

1 Growth Stock Down 24% to Buy Right Now

With this impressive growth stock trading more than 20% off its high, it's the perfect stock to buy right now…

Read more »

Dividend Stocks

What Should Investors Watch in Aecon Stock’s Earnings Report?

Aecon (TSX:ARE) stock has earnings coming out this week, and after disappointing fourth-quarter results, this is what investors should watch.

Read more »

Freight Train
Dividend Stocks

CNR Stock: Can the Top Stock Keep it Up?

CNR (TSX:CNR) stock has had a pretty crazy last few years, but after a strong fourth quarter, can the top…

Read more »

Hand arranging wood block stacking as step stair with arrow up.
Dividend Stocks

3 Stocks Ready for Dividend Hikes in 2024

These top TSX dividend stocks should boost their distributions this year.

Read more »