Beat the (Rising!) TSX With These Cash-Gushing Canadian Dividend Stocks

Can dividend stocks beat the TSX? They very well can, even when the TSX is at its all-time high. Here are some of these stocks.

Puja Tayal

Author Bio

Puja Tayal grew up in a small-business family where dinner conversations often centred on working capital and savings. Her early experiences with investing, particularly during the 2008 financial crisis, shaped her approach to understanding markets and evaluating investment opportunities. She began her career at a mutual fund company before moving into investor education and financial writing for asset and wealth management firms. Before joining The Motley Fool, Puja wrote for Market Realist, where she extensively covered the semiconductor industry. Her published work has also appeared in The Indian Express. Puja believes every stock has a story that can help investors understand its potential returns. She combines business analysis with different investing approaches to help investors make informed decisions and align their portfolios with their long-term financial goals. Outside of finance, Puja enjoys long drives, catching up with friends, watching superhero and science-fiction movies, and managing her family portfolio. She also has a keen interest in artificial intelligence and its potential to reshape the world.

Education

Bachelor's degree in Accounting and Finance, University of Mumbai (2007)
CFA Level I

Areas of Expertise

Qualitative company analysis, management strategy, risk assessment, long-term investing, portfolio diversification and rebalancing, dividend reinvestment, cyclical growth opportunities, compounding strategies, growth stocks, and dividend stocks.

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Favorite Investment Quote

"Risk comes from not knowing what you're doing." — Warren Buffett

Published October 21, 2024 6:00 pm EDT

The year 2021 saw a tech stock bubble followed by a correction in 2022 and a recovery in the following two years. The TSX Composite Index has surpassed its 2021 peak, making new highs. Over these years, the index produced an average annual return of 8.7%. Those who were actively investing in the dip and rally made market-beating returns. But what if you could beat the TSX by buying and holding Canadian dividend stocks?

Canadian Dollars bills — Source: Getty Images

Two Canadian dividend stocks that can help you beat the TSX

A $1,000 investment in the TSX Composite Index in October 2019 would now be $1,517 at an 8.7% CAGR. However, some Canadian dividend stocks have grown their dividend faster than 8.7% and even increased their stock price.

goeasy stock

The non-prime lender goeasy (TSX: GSY) has been growing its dividend at a CAGR of 20% for the last 10 years. And that’s not all. Its stock price also surged 232% in the last five years. How did the lender grow at such a fast pace? It followed a four-pronged approach of expanding its geographical outreach, increasing its loan portfolio offerings and services, increasing its distribution channels with more branches and retail point-of-sales, and improving the financial wellness of customers.

As the lender grew its portfolio, its stock price increased. The stock is currently trading at 2.8 times its book value per share. The company pays a part of its interest income as dividends to shareholders. And at the speed at which it is growing its loan portfolio, the bigger the portfolio, the higher the interest. This helped it maintain a strong dividend growth rate.

If you invested $1,000 in goeasy in October 2019, its value would now be $3,247 plus a cumulative dividend of $282 received over these years. This stock would have helped you beat the market by $2,000 in these five years. And this is just the lowest of the range. If you reinvested the dividend to buy more shares of goeasy or some other high-growth stocks, the gap would widen.

It is not too late. You can still invest in the lender and book your future returns.

Power Corporation of Canada

The financial services holding company Power Corporation of Canada (TSX: POW) has been growing its dividend at a CAGR of 7% for the last 10 years. Despite increasing its dividend by 7%, its payout ratio is around 56%.

The company owns mutual funds, wealth management, life insurance, and private equity firms. It operates in three main markets, Canada, the United States, and Europe, giving you the benefit of all developed markets. The management has been restructuring its holdings to derive more shareholder value. The company’s adjusted net asset value per share was $50.24 as of August 8.

While the share price increases with the increase in the value of its holdings, the dividends increase as the operating companies it holds pay dividends to POW. While the stock price surged 44% in the last five years, underperforming the TSX, the dividend payout helped it beat the TSX.

If you invested $1,000 in POW in October 2019, its value would now be $1,414 plus a cumulative dividend of $318 received over these years. This stock would have helped you beat the market by $216 in these five years.