Although the equity markets bounced back strongly yesterday amid better-than-expected first-time jobless claims for the week ended on August 3, the S&P/TSX Composite Index still trades 3.8% lower this month. Given the uncertainty, investors should invest in quality dividend stocks that stabilize their portfolios.
Here are three TSX stocks that have doubled their dividends over the last five years, indicating the strength of their cash flows.
Canadian Natural Resources
Canadian Natural Resources (TSX:CNQ) is an energy company operating in Western Canada, the North Sea, and Offshore Africa. Given its low-risk, high-value reserves and diversified and balanced asset base, the company would break even with WTI (West Texas Intermediate) crude trading in mid-US$30 per barrel. So, it generates stable cash flows, allowing it to raise its dividends consistently. Over the last five years, the company has raised its dividends from $0.67/share in 2018 to $1.85/share in 2023, presenting an annualized rate of 22.5%.
Continuing its dividend growth, CNQ raised its quarterly dividends by 5% earlier this year to $0.525/share. Its forward yield currently stands at a healthy 4.5%. Meanwhile, the company plans to invest $5.4 billion this year, with $2.5 billion in conventional exploration and production and $2.9 billion in thermal and oil sands mining and upgrading. With its net debt lower than its target of $10 billion, the company intends to return 100% of its free cash flows to shareholders. Considering all these factors, I believe CNQ would be an excellent dividend stock to have in your portfolio in this volatile environment.
goeasy
Second on my list would be goeasy (TSX:GSY). The subprime lender has been expanding its loan portfolio at an annualized rate of 34.3% over the last five years, while its top line has grown at a 19.8% CAGR (compound annual growth rate). Besides, its net charge-off rate has declined from 13.1% in 2018 to 8.9%, while its adjusted operating margin improved from 25.4% to 39.3%. Supported by its solid operating performance, the company has raised its dividends from $0.9/share in 2018 to $3.84/share in 2023, representing a 33.7% annualized increase. Furthermore, it raised its 2024 dividends by 22% to $4.68/share, with its forward yield at 2.4%.
Despite its strong performance over the last two decades, goeasy has acquired just 2% of the $218 billion Canadian subprime market. So, its scope for expansion looks healthy. Given its expanded product offerings, multiple distribution channels, strengthening of digital infrastructure, and geographical expansion, the company could maintain its financial growth in the coming years. Also, falling interest rates could boost credit demand, benefiting goeasy. Considering all these factors, I believe goeasy should sustain its dividend growth.
Alimentation Couche-Tard
Alimentation Couche-Tard (TSX:ATD) owns and operates around 16,700 convenience stores across 31 countries. Supported by organic growth acquisitions, the company’s revenue and adjusted EPS (earnings per share) have grown at an annualized rate of 3.2% and 11.1%, respectively. Besides, its cash flows from operations have increased at a 9.3% CAGR. Supported by these solid financials, the company has raised its dividends from $0.225/share in fiscal 2019 to $0.665/share in fiscal 2024, representing an annualized growth of 24.2%. Although its yield is just 0.9%, shareholders can benefit from consistent dividend growth.
Further, the retail market in the United States is highly fragmented, with 60% of the single-store operators operating 60% of the stores. Given its expertise in completing and integrating acquired companies and a healthy financial position, the company could strengthen its footprint. Besides, its loyalty programs, promotional activities, and a five-year “10 For The Win” strategy could boost its financials in the coming years. Amid these growth initiatives, I expect ATD to maintain its dividend growth, thus making it an excellent buy in this uncertain outlook.
