Beat the TSX Index With These Cash-Gushing Dividend Stocks

These cash flow-rich stocks are more likely to gush passive dividend income streams long into the future.

| More on:
A plant grows from coins.

Source: Getty Images

The TSX Index is chalk full of dividend stocks. So, if you want income and also want to beat the Index, you will have to pick some extraordinary stocks. Not all dividend stocks are built the same.

Forget dividend yield, look at the business first

Stocks with massive yields might be gushing big dividends, but that doesn’t necessarily mean their businesses are gushing cash. Several well-known Canadian dividend stocks are not sustaining their dividends with cash flows from the business. Their dividends are highly at risk of being cut.

You don’t want to own these stocks. A stock with a more modest, yet sustainable dividend is by far the better bet for beating the TSX. If you want income and good capital returns, here are three fast-growing dividend stocks to own today.

A compounding financial stock with a soaring dividend

goeasy (TSX:GSY) stock has soundly beat the TSX over the past 10 years. Its stock is up 815% in that time. Add in goeasy’s substantial dividend payments and shareholders would have a 1,074% total return.

The lender provides loans to non-prime and sub-prime consumers across Canada. It has used its expansive retail network and online platform to take significant market share. The company continues to innovate its financial products. It recently announced the addition of a credit card product.

goeasy has expanded earnings per share by 28% over the past decade. It has increased its annual dividend by the same rate. This stock yields 2.7% today. GSY has been the ultimate income and growth stock in Canada, and it should continue that trajectory in the years ahead.

A small but quickly growing dividend

TFI International (TSX:TFII) is another stock gushing cash. It has compounded annual free cash flow per share by over 25% over the past five years. Its 1.2% yield may not be overly impressive. However, this stock has increased its dividend per share by an 18% compounded annual growth rate over the past five years.

TFI operates one of the largest trucking, transport, and freight businesses in Canada. The company has used a mix of operating expertise and many smart acquisitions to build a substantial shipping portfolio.

This company has all the right fundamentals for a stock set to beat the TSX. It has a long-term CEO (who happens to be a major shareholder), a solid balance sheet, room to improve operating margins, and a reasonable valuation.

An energy stock that compounds its dividend by double digits

Canadian Natural Resources (TSX:CNQ) is one of the best companies in Canada. Yes, it operates in the cyclical energy industry. However, that hasn’t stopped this stock from growing its dividend by a 20%-plus compounded annual rate for 20-plus years. It is an incredible track record.

Canadian Natural is simply a high-quality business worth holding for the long term. The energy producer has excellent assets that could produce energy for many decades in the future. CNQ is well-managed by a highly invested executive team. It is a low-cost energy producer that can sustain strong free cash flow generation through the energy cycle.

The company just hit its $10 billion sustainable debt target. Now, it plans to return 100% of its spare cash back to shareholders. Its base dividend yields 3.8% today.

Further share buybacks and special dividends are likely on their way. Shareholders should continue to see market-beating returns in the coming years.

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 Robin Brown has positions in goeasy and TFI International. The Motley Fool recommends Canadian Natural Resources. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Woman has an idea
Dividend Stocks

3 No-Brainer Best Dividend Stocks in Canada to Buy With $500 Right Now

Are you craving more cash flow? $500 in one of these best dividend stocks in Canada might deliver a slice…

Read more »

Canadian energy stocks are rising with oil prices
Dividend Stocks

5 Stocks Whose Dividends Just Keep Growing

Stocks like Enbridge and Fortis are growing their dividends for decades, and returning higher cash to their shareholders.

Read more »

Dividend Stocks

2 Stocks I’m Loading Up On in 2024

Restaurant Brands International (TSX:QSR) and another stock I'm pretty close to buying right here, right now.

Read more »

protect, safe, trust
Dividend Stocks

RRSP Investors: 2 Superior Dividend Stocks for Optimal Returns

Superior dividend stocks like the Canadian National Railway (TSX:CNR) can add income power to your portfolio.

Read more »

Increasing yield
Dividend Stocks

TFSA Passive Income: 2 High-Yield Stocks to Buy Before They Bounce

These top TSX dividend-growth stocks look cheap today and offer high yields.

Read more »

Portrait of woman having fun in the street.
Dividend Stocks

Why I Can’t Stop Buying Shares of This Magnificent High-Yield Dividend Stock in My TFSA

This dividend stock continues to be a top winner, even with returns falling the last few years. We're nearing some…

Read more »

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Dividend Stocks

TFSA Investors: 1 Cheap Dividend Stock That Could Soar in 2025

This dividend-growth stock now trades at a discounted price and offers a 7% yield.

Read more »

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

1 Dividend Stock Down 13% to Buy Right Now

Are you looking for a buy-the-dip opportunity? This dividend stock is down 13% and is a buy right now before…

Read more »