3 Stocks Set for Dividend Increases This Year

Here are three TSX stocks that are set for dividend hikes later this year.

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Here are three TSX stocks that are set for dividend hikes later this year. The first name is a turnaround play. The second idea is a traditional blue chip dividend stock. The third one is a growth-oriented dividend stock.

Saputo

Consumer staples stocks make up about 5% of the Canadian stock market. If you want to gain dividend exposure from this sector, Saputo (TSX:SAP) is one of the TSX stocks to consider. The packaged foods stock could be turning around after years of weakness. After consolidating in the $25-$28 range, the stock broke out and hit as high as $30.

Analysts think the consumer staples stock should be worth around $34-$35 over the next 12 months, which would result in price gains of about 17% from $29.37 per share at writing. No matter what, investors can count on another dividend increase from Saputo in August.

The food stock has increased its dividend for about 26 consecutive years. At writing, it offers a dividend yield of 2.5% and has the capacity to continue increasing its dividend from a sustainable payout ratio

Fortis

In September, investors can expect a dividend hike from Fortis (TSX:FTS). The utility with diversified regulated utility operations in North America makes highly reliable earnings as it can earn set returns on its investments. For example, in the past decade, it increased its adjusted earnings per share by north of 6% per year, which led to similar growth in its dividend.

For half a century, the utility stock has increased its dividend every year! Even in a higher interest rate environment, management sees the dividend growing by 4-6% per year. Its payout ratio is sustainable at about 74% of adjusted earnings.

FTS Dividend Yield Chart

FTS Dividend Yield data by YCharts

At $53.69 per share at writing, it offers a dividend yield of 4.4%, which is at the high end of its 10-year range, as shown in the graph above. The stock seems to be fairly valued in the current environment. However, it does trade at a discount of roughly 10% from its long-term normal valuation.

Waste Connections

Waste Connections (TSX:WCN) has been a wonderful industrial stock whose earnings have had little impact from the ups and downs of the economic cycle. According to YCharts, it has also been a fabulous long-term investment, for example, generating total returns of 20% per year over the last decade, which greatly outperformed the Canadian stock market returns of north of 7% per year in the period.

WCN Total Return Level Chart

WCN Total Return Level data by YCharts from an initial investment of $10,000

It is a Canadian Dividend Aristocrat with a 10-year dividend-growth rate of 14.3%. At $231.56 per share at writing, it’s not a cheap stock, trading at a forward price-to-earnings ratio of about 35. However, analysts generally think it’s worth the premium multiple. At this quotation, they think the stock is fairly valued.

Waste Connections’s dividend yield is small at about 0.7%, but it could deliver dividend growth of over 10% per year over the next few years. So, it is a more growth-oriented 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 Kay Ng has positions in Fortis. The Motley Fool recommends Fortis. The Motley Fool has a disclosure policy.

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