Investing in top dividend stocks can provide a reliable source of passive income. However, to maximize the growth of your passive income over time, it’s crucial to focus on dividend growers. These are companies with solid fundamentals and a growing earnings base that enables them to consistently increase their dividends and enhance shareholders’ value.
A growing dividend income stream reduces your investment’s payback period and allows for reinvestment, enhancing your returns over time.
With this background, here are two incredible Canadian stocks to buy hand over fist for a growing dividend income stream.
Canadian Natural Resources
Speaking of dividend growers, investors could consider buying Canadian Natural Resources(TSX:CNQ) stock. This leading crude oil and natural gas producer is known for its high dividend-growth rate and commitment to returning higher cash to its shareholders.
Canadian Natural Resources has an impressive track record of dividend increases. For instance, 2024 marks the company’s 24th consecutive year of dividend growth. Over this period, this energy company’s dividend grew at a compound annual growth rate (CAGR) of 21%. Its higher dividend-growth rate and robust payouts reflect its strong financial position and management’s confidence in the sustainability of its business model.
The company owns a well-balanced and diverse portfolio of assets, encompassing various grades of crude oil—ranging from light to heavy—alongside natural gas. This diversity not only mitigates risk but also optimizes capital investments, thereby maximizing value for shareholders.
Moreover, Canadian Natural Resources benefits from the resilience of its long-life, low-decline production assets. These assets, combined with efficient operations and low reserve replacement costs, enable the company to generate solid adjusted funds flow across commodity price cycles. Such stability underscores its ability to weather market fluctuations while boosting shareholder returns.
Canadian Natural Resources also maintains a substantial inventory of low-capital exposure projects within its conventional asset base. These projects are designed for swift execution and offer attractive returns, bolstering growth prospects. Furthermore, Canadian Natural Resources benefits from a vast, underdeveloped land base, facilitating extensive and repeatable drilling programs that enhance operational efficiency and support long-term growth initiatives.
In summary, Canadian Natural Resources’s focus on long-life assets, efficient capital allocation, and diversified production portfolio positions it favourably for sustained earnings growth and robust dividend payments. It offers a quarterly dividend of $0.525 per share, translating into a yield of 4.5% near the current market price.
TC Energy
TC Energy (TSX:TRP) is a compelling stock for investors seeking a growing passive-income stream. This dividend grower owns an energy infrastructure business with a solid history of returning substantial cash to its shareholders through higher dividend payments.
TC Energy has increased its dividend for 24 consecutive years. During the same period, its dividend grew at a CAGR of 7%.
TC Energy benefits from the high utilization of its assets. Moreover, it generates most of its earnings through rate-regulated assets and long-term contracts. These attributes add stability to its business and enable it to grow its earnings and dividend payments consistently.
The company is focusing on optimizing its portfolio and will spin off the Liquids business to maximize shareholders’ value. Moreover, the company is set to deploy approximately $7 billion in new assets by 2024, further bolstering its financial performance.
Overall, TC Energy’s diversified asset base and utility-like revenue model, combined with robust demand for its services and investments in low-carbon energy solutions, position it favourably for sustained earnings growth. These factors will enable it to boost its shareholders’ return through higher dividend payments. It pays a quarterly dividend of $0.96 per share, yielding over 6% near the current market price. Additionally, TC Energy targets annual dividend growth of 3-5%, reinforcing its commitment to enhancing shareholder income over time.
