For savvy investors, choosing dividend stocks goes beyond simply looking at the current yield. The true value lies in a company’s ability to grow its dividends over time, as this growth often correlates with long-term price appreciation.
In a landscape where investors are always searching for wealth-creating opportunities, stocks with growth and the willingness to power dividend growth stand out. Here, we place the spotlight on a couple of these companies that have shown remarkable dividend growth recently, making them worthy of your attention.
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Dollarama: A value retailer on the rise
Dollarama (TSX: DOL) has carved a niche as a leading value retailer with a strong presence in both Canada and Latin America. Interestingly, this company has thrived amidst recent inflationary pressures, with earnings per share soaring in the 20% range over the last three fiscal years.
This impressive performance is not merely a short-term trend, as Dollarama has demonstrated sustained long-term growth as well. Over the past decade, its revenue per share increased at a compound annual growth rate (CAGR) of 15.8%. This growth has translated to operating income per share rising at a CAGR of 20.6%.
Such figures suggest that Dollarama is not only increasing sales but also improving operational efficiencies, leading to enhanced profit margins. Moreover, its diluted earnings per share have outpaced revenue growth with a remarkable CAGR of 19.9%. While the dividend per share growth during this period was a CAGR of 11.7%, this rate lags behind earnings growth, indicating that the company is prioritizing capital allocation towards its business expansion rather than returning it to shareholders just yet.
Although Dollarama’s current dividend yield hovers around a modest 0.25%, the potential for significant future growth is evident. The company’s last dividend hike, announced in April, was an astounding 29.9%, showcasing its strong commitment to rewarding shareholders. That said, with shares surging 52% over the last year and trading at a record high price-to-earnings ratio exceeding 36, prospective investors may want to consider waiting for a market correction to secure a more favourable entry point.
Jamieson Wellness: A leader in health and wellness
Another noteworthy contender in the dividend space is Jamieson Wellness (TSX: JWEL), a name familiar to many Canadians as the go-to brand for vitamins, minerals, and supplements. In 2022, Jamieson made a strategic move by acquiring the youtheory brand, a well-established lifestyle brand in the United States that has significant growth potential.
Jamieson has exhibited promising growth metrics over the past five years, with its revenue per share increasing at a CAGR of 14.4%. This growth has translated to its operating income per share rising at a CAGR of 10.1% and diluted earnings per share climbing at a CAGR of 10.7%. Notably, during this period, the company managed to grow its dividend per share at an impressive CAGR of 16.2%, reflecting its commitment to returning value to shareholders.
The company recently announced a dividend hike of 10.5% in August, further solidifying its position as a reliable dividend payer. At its recent share price of $34.92, Jamieson offers a dividend yield of 2.4%. Analysts project near-term upside potential of approximately 13%, combining capital appreciation with a solid dividend yield for an attractive overall return. Given Jamieson’s robust growth outlook, it has the potential to maintain a dividend growth trajectory above 10% annually over the next couple of years.
The Foolish investor takeaway
Both Dollarama and Jamieson Wellness are examples of robust dividend powerhouses. With their impressive growth metrics and commitment to returning value to shareholders, they deserve a spot on any investor’s watchlist. Whether you’re looking for a long-term hold or a potential entry point during market corrections, these stocks could elevate your portfolio with both income and growth potential.
