2 Dividend-Growth Stocks With TSX-Beating Potential That Deserve More Respect

Alimentation Couche-Tard (TSX:ATD) and another dividend grower are worth their weight in gold!

| More on:
Growing plant shoots on coins

Image source: Getty Images

Dividend-growth stocks may be a better option than those high-yield dividend plays over an extended period of time. Undoubtedly, the higher the rate of dividend growth, the more passive income you’ll be rewarded with in the future. And while yields (let’s say 1-2%) may not be nearly as rewarding today as some of the more distressed ultra-high-yielders (think yields in the range of 6-8%), the potential for total returns (that’s capital gains plus dividend payments) stand to be considerably higher.

For young investors, dividend-growth plays seem to be the better choice. In a way, they offer the best of both worlds: gains and passive income. So, if you’ve got the lengthy time horizon and the patience to let them grow earnings over the years, the following dividend growers may be worth checking in on as we head into what could be a sizzling summer for the broader stock market.

Alimentation Couche-Tard

Dividends aren’t exactly a main attraction to shares of convenience store firm Alimentation Couche-Tard (TSX:ATD). The dividend payments are really more of an afterthought, especially with the magnitude of capital gains the stock has posted in the past decade.

In the last 10 years, ATD stock has soared almost 400%. That’s some serious appreciation that’s the result of the company’s tried and tested growth model. Indeed, mergers and acquisitions play a big role in the growth narrative. But in recent years, Couche-Tard has shown us it can command impressive same-store sales growth (SSSG) as well.

The 0.93% dividend yield may not seem like much, but over the years, the yield based on your invested principal only stands to grow. And if dividend growth continues to rise hand in hand with earnings growth, I like ATD as a dividend-growth hero for the long haul. In any given year, it’s not out of the ordinary for the convenience retailer to hike its dividend payout by a double-digit percentage.

Yes, the dividend was already low, and the pace of hikes could slow as the yield gets a bit more swollen. Regardless, I’m a fan of not just the gains potential but how large the dividend could grow in the next decade. Personally, I think it could more than double in the next eight years. So, if you don’t need the passive income today but may need it 10 years from now, ATD stock is worth consideration right here at $75 and change per share.


Enbridge (TSX:ENB) is another powerful dividend grower that boasts a massive yield of 7.31% at the time of writing. Indeed, despite the already hefty dividend, management finds ways to continue hiking it, even through the roughest environments. Indeed, ENB stock may lack gains, with not much on the capital gains front to show for an investment over the past 10 years.

That said, I view the cash cow as cheap (18.9 times trailing price to earnings), with the ability to bounce back and grow dividends as it looks to continue putting together more good quarters. Income-savvy investors may wish to pursue ENB stock over ATD if they want a powerful combo of a high upfront yield, dividend-growth potential, and share price bounce-back potential.

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. The Motley Fool has positions in and recommends Alimentation Couche-Tard. The Motley Fool recommends Enbridge. The Motley Fool has a disclosure policy.

More on Investing

Nickel ore is mined from the ground.

Cameco vs. Barrick Gold: 2 Undervalued Mining Stocks Set to Unearth Gains

Cameco (TSX:CCO) and Barrick Gold (TSX:ABX) are top mining stocks that look to be on sale right here!

Read more »

stock research, analyze data

Could Dollarama Stock Reach $150?

After gaining over 44% in the last 12 months, can Dollarama stock keep up this exceptional growth rate and climb…

Read more »

Tech Stocks

3 Reasons to Buy Shopify Stock Like There’s No Tomorrow 

Shopify stock fell 25% after reporting disappointing guidance. Should investors buy the dip and hold the stock for the long…

Read more »

grow dividends
Dividend Stocks

3 Canadian Stocks With a Real Chance of Doubling Your TFSA’s Value

Three outperforming Canadian stocks can help TFSA investors double their account balances.

Read more »

Hand writing Time for Action concept with red marker on transparent wipe board.
Dividend Stocks

3 No-Brainer Stocks I’d Buy Right Now Without Hesitation

At any given time, the market may have certain stocks that offer a powerful combination of reliability, potential, valuation, etc.,…

Read more »

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

3 Canadian Growth Stocks I’d Buy Under $30

These under $30 Canadian growth stocks are well-positioned to capitalize on mega trends such as e-commerce, the electrification of vehicles,…

Read more »

Gas pipelines
Stocks for Beginners

3 Reasons to Buy Enbridge Stock Like There’s No Tomorrow

Enbridge (TSX:ENB) is a superb long-term option. Here's why you should buy Enbridge stock right now and hold it for…

Read more »

money cash dividends
Dividend Stocks

This 8.39% Dividend Stock Can Pay $100 Cash Every Month

Consider investing in this monthly dividend stock at current levels to lock in high-yielding monthly distributions to create a good…

Read more »