In general, the closer to retirement investors get, the more dividend stocks you want to buy, as earning significant and consistent income becomes far more important than earning significant capital gains.
However, while that may be true, younger investors can still reap plenty of benefits from buying fabulous dividend stocks, especially when you consider the power of compound interest and the ability to reinvest your dividend earnings into more stocks going forward.
Another significant benefit of dividend stocks is their proven track record of profit-making. To even begin paying a dividend, companies need to have confidence in their ability to consistently generate profits. They also need to earn enough profits to continue investing in growing their business while still having cash left over to return to investors.
So, with that in mind, if you’re looking for top dividend stocks to buy in July, here are three fabulous stocks to consider adding to your portfolio today.
Two lower-yield stocks with significant growth potential
One of the best perks of investing in dividend stocks is the many different varieties of companies to buy. Not all dividend stocks need to offer a significant yield with less growth potential. Often, you can find dividend stocks with slightly lower yields that still offer plenty of capital gains potential over the long run, such as Parkland (TSX:PKI) and goeasy (TSX:GSY).
Parkland is an impressive energy stock with a diversified business that ranges from midstream operations to retail operations like gas stations and convenience stores.
This gives it a mix of resilient, recession-resistant businesses, making it an ideal stock for both passive-income generation and long-term capital gains potential.
Plus, the stock is currently undervalued, and six of the eight analysts that cover it give it a buy rating. The other two analysts covering Parkland give it a hold rating. Each of the eight analysts’ target prices averages over $51, a more than 35% premium to where the stock trades today, making it one of the top dividend stocks to buy on the TSX.
Furthermore, its current dividend yield of roughly 3.7% is certainly attractive when combined with its attractive growth potential over the coming years.
In fact, analysts are estimating that in just a year from now, Parkland’s normalized earnings per share will rise by 14.7%.
Meanwhile, goeasy, the specialty finance company, has been one of the best growth stocks on the TSX for years now and continues to have significant growth potential going forward. So, it’s unsurprising that of the eight analysts covering goeasy, seven give it a buy rating with just one hold rating.
And while its average analyst target price of $213.50 may only be a roughly 15% premium to where the stock trades today, that target price is often consistently rerated upwards as goeasy constantly smashes earnings expectations and rapidly grows its profitability.
Similarly, its 2.5% dividend yield may not seem that high, but it’s also been increased by 277% in the last five years. Furthermore, goeasy’s dividend yield is lower because it still invests most of its earnings into future growth. And given the rate at which it grows its revenue and earnings, that’s the most efficient way to use its capital right now.
A fabulous high-yield dividend stock to buy in July
If you’re really looking to boost your passive income, though, and want to buy a high-yield dividend stock, then there’s no question Freehold Royalties (TSX:FRU) is one of the best to buy now.
Freehold is an ideal stock due to its asset-light business model and low-risk operations, where it earns a royalty from other energy companies that use its land to produce their oil and gas.
This means that, unlike traditional energy producers, Freehold barely has to spend any cash on capital expenditures to earn revenue. Instead, it can sit back and collect its royalty payments, which it uses to fund its significant 7.7% dividend.
Plus, because it keeps its payout ratio sustainable to keep its dividend safe, Freehold is also constantly building up its cash position, which it can also use to buy more land and expand its operations.
Therefore, if you’re looking for fabulous dividend stocks to buy in July, Freehold is undoubtedly a top choice for many Canadians.
