Income-focused investors build their stock portfolios around companies with impressive dividend track records. However, some are choosier than others and would also include dividend growth streaks in their selection process. To them, stocks whose dividends keep growing are better investment prospects.
The TSX is home to several dividend growers or the so-called Dividend Aristocrats. Manulife Financial (TSX: MFC) and Imperial Oil (TSX: IMO) belong to the elite group of dividend payers with stable and increasing dividends. You can build enormous wealth in a longer investment horizon from the insurer’s and oil producer’s shares.
Thriving business and growth drivers
On February 14, 2014, Manulife announced a 9.6% increase to its quarterly common shareholders’ dividend, the 13th consecutive annual dividend hike since 2011. Suppose you invest today. The large-cap stock trades at $37 per share and pays a 4.32% dividend. MFC also outperforms to broader market year to date at +29.35% versus +8.18%.
The $66.22 billion international financial services provider should have no problems paying quarterly dividends and sustaining its dividend-growth streak. Manulife thrives due to multiple growth drivers, especially the Asian market and the wealth and asset management business.
Management expects consistent cash flow and targets to increase dividends at a six-year compound annual growth rate (CAGR) of 10% and a 35-45% payout ratio in the medium term. The goals are achievable now that the insurance industry is undergoing accelerated digitalization.
Manulife is digitalizing and automating workflows through generative artificial intelligence (AI) and advanced analytics.
In the first quarter (Q1) of 2024, net income attributable to shareholders declined 38% to $866 million versus Q1 2023, but core earnings rose 16% year-over-year to $1.75 billion. Its president and chief executive officer (CEO), Roy Gori, said the results reflect a solid start to 2024 as all insurance segments posted double-digit growth.
Also, during the quarter, Manulife closed a milestone $10 billion reinsurance transaction with Global Atlantic Financial Group. The deal reinsures a diversified block of the Canadian firm’s life, annuity, and long-term-care (LTC) insurance business, originating in the U.S. and Japan.
Notably, Manulife saw its annual premium equivalent (APM) sales, new business value (NBV) and new business contractual service margin (CSM) increase by 21%, 34%, and 52% from a year ago. “Looking ahead, we remain committed to further improving return on equity (ROE) through disciplined capital allocation and continued business performance improvements,” said Colin Simpson, chief financial officer of Manulife.
A more than 100-year dividend track record
Imperial Oil doesn’t pay the highest dividend, but its quarterly payouts should be safe and secure (24.45% payout ratio). American oil giant ExxonMobil has a 69.6% ownership stake in this $51.4 billion petroleum company and Canada’s second-largest integrated energy firm.
On April 26, 2024, Imperial Oil announced a dividend increase for Q2 2024, payable on July 1, 2024. In addition to more than 100 years of dividend payment history, this latest hike is the 30th consecutive increase in as many years. As of this writing, the share price is $95.87 (+28.85% year to date), while the dividend yield is a decent 2.5%.
Brad Corson, Imperial Oil’s chairman, president, and CEO, said the company’s integrated business model is a competitive advantage. “A reliable and growing dividend is the foundation of our shareholder returns program,” he added.
Buy and hold
Manulife and Imperial Oil are buy-and-hold stocks for long-term investors. Expect both Dividend Aristocrats to continuously increase the size of their payouts for years.
