2 Stocks With Dividend Growth, Through Good Times and Bad

Enbridge (TSX:ENB) stock and another dividend growth play that could fare well over the next few years.

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Canadian investors should focus on the types of dividend growth stocks that can continue giving investors those annual raises even through the worst of times. Undoubtedly, it takes a true dividend growth hero to keep raising the payout when the macro environment is skating on thin ice.

That said, there are durable businesses out there with resilient cash flow streams that can withstand the harshest environments. Indeed, looking back at the Great Recession, you can see which firms were able to keep steady, even as the American stock market shed more than half of its value. Though I don’t expect another such severe recession, I do think the meltdown shined a light on the resilience of various firms with ultra-wide moats.

Indeed, sometimes, such a moat is required to enjoy dividend growth in even the toughest of times.

So, without further ado, let’s check in with three dividend growers that I view as quite fair-valued at this juncture. Of course, markets are moving higher these days, causing some to neglect the defensive parts of their portfolios.

Once volatility returns (it always does), though, the price of admission to the following wide-moat cash cows, I believe, could begin to go up again.

Though nobody knows when investors will look to rotate back into the tried and tested wide-moat dividend growth plays, I do think investors seeking to build wealth through the decades should treat any moments of undervaluation as opportunities to load up the portfolio shopping cart.


Enbridge (TSX:ENB) is a pipeline firm that’s continued to pay (and raise) dividends amid the past decade of headwinds. Undoubtedly, shares of ENB have not gone far, sinking around 4% in the past 10 years. At 17.1 times trailing price-to-earnings (P/E), the stock is a cheap way to score a nice, stable 7.53% dividend yield. Even if ENB stock remains a roller-coaster ride from here, investors can sleep comfortably knowing that management has preserved the dividend through more dire conditions.

In any case, Enbridge has a wide enough moat (regulatory hurdles make it so tough to start new pipelines) to keep spoiling investors with dividends. And as the firm looks to drive operating efficiencies, look for the stock to finally sustain a breakout at some point in the distant future.

For now, Enbridge seems primarily like a play fit for passive income seekers who don’t mind choppiness. If you’re patient, though, perhaps ENB stock may be a source of solid total returns (that’s capital gains and dividends).

CN Rail

CN Rail (TSX:CNR) has an even wider moat, in my opinion, with its enviable rail network that spans all three major continental coasts. Of course, it would have been nice if CN Rail also had a presence in Mexico. Regardless, I do think that combined with truckers CN Rail also stands as a firm to benefit from goods coming in from Mexico.

For now, though, the main attraction has to be management’s ability to improve its operating ratio. The stock goes for just 20.7 times trailing price-to-earnings with a 1.89% dividend yield. That’s cheap for a proven dividend grower that’s been making new highs of late at $176 and change per share.

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 Canadian National Railway. The Motley Fool recommends Canadian National Railway and Enbridge. The Motley Fool has a disclosure policy.

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