The best dividend stocks to own are those that regularly and reliably grow their dividend. Ultimately, dividends need to be paid out of the excess earnings or cash flow of the business.
Businesses that grow earnings/cash flows are more likely to also grow their dividend in lockstep with that growth. If a company is growing earnings, its stock is likely to follow (as does its dividends). You can get the best of both capital and income appreciation by owning dividend-growth stocks.
If you are looking for some stocks that could still increase their dividend in 2024 and beyond, here are three stocks to look at today.
An energy stock with more dividends ahead
Cenovus Energy (TSX: CVE) may not have the highest dividend yield. It yields 2.7% today. Yet, its dividend growth trajectory in the past few years has been spectacular.
Over the past five years, its dividend has increased by a 22.8% compounded annual growth rate (CAGR). It has also paid a couple of special dividends, including a $0.135 per share special dividend paid in May 2024.
It just increased its quarterly dividend 28% in June. This is a significant increase. Another increase may not be likely in 2024. However, the company is very close to its $4 billion net debt target.
Once it hits that, it has promised to return 100% of its excess cash flow to shareholders. A base dividend hike or perhaps a special dividend could certainly be in the works if it can hit its debt target in the third or fourth quarter.
A tech stock with a growing dividend
Enghouse Systems (TSX: ENGH) has traditionally been a technology growth story. Unfortunately, growth has somewhat stalled in the past few years. Communication technology demand (its largest business segment) has pulled back and that has hit the stock.
Enghouse has not been immune, and its organic growth has declined. The company is backfilling this with acquisitions, but its pace of acquisitions has been slower than many anticipated.
Yet, the company continues to yield a tonne of excess cash from its business. It is sitting with +$260 million of net cash today.
As a result, it has been steadily increasing its dividend. Its quarterly dividend per share increased 18% in May 2024. Its dividend per share has risen by an 18% CAGR over the past 10 years.
While you wait for the company to increase its acquisition pace, you can collect a nice 3.3% dividend yield.
A financial stock with growth and income
Another stock for fast-growing dividends is goeasy (TSX: GSY). It has grown its dividend by a 32% CAGR over the past five years and a 28% CAGR over the past 10. It raised its annual dividend by 22% earlier this year.
The company has delivered exceptional growth as demand for non-prime loans has continued to rise in Canada. The company continues to expand its product offering and its retail presence in Canada.
goeasy just announced that it will be transitioning chief executive officers (CEOs) at the end of the year. However, the company has a deep bench, and it should continue its solid trajectory.
Right now, goeasy yields 2.6%. The stock recently fell 12% on news of the CEO transition. It’s a decent time to add if you can look past the future leadership change. If it can continue its high teens/low-20s earnings per share growth rate, dividends are likely to keep growing.
