The first thing that comes to mind when you hear dividends are real estate, banks, utilities, and energy stocks. These sectors have dividend aristocrats that have been funding the retirement of their loyal shareholders. When you want an immediate return, high dividend yields are something you should look for. However, if you have a 10-year time horizon, you could consider investing in mid-cap stocks that may not give higher yields but can give higher growth.
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10-year prediction for these magnificent dividend stocks
Cogeco Communications
At a market cap of $2.8 billion, Cogeco Communications (TSX:CCA) is a telecom company that caters to Canada and the United States. At a time when Canadian telecom giants struggled to maintain their profits and battled with high debt, Cogeco continued to grow its network gradually while maintaining a high adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) margin of 48.5%. Higher adjusted EBITDA, lower net capital expenditure, and lower financial expense increased its free cash flow (FCF) by 66% in fiscal 2024.
However, Cogeco expects its FCF to fall by 0–10% in fiscal 2025 as it invests in growth projects and financial expense increases. Hence, the company has slowed its dividend growth rate from 10% in the last 10 years to 8% in 2025. There is ample opportunity for Cogeco to expand and scale. CCA’s dividend payout ratio of 30% leaves enough room to fund its capital spending and repay debt. Its revenue and FCF could grow through network expansion in the coming 10 years.
Cogeco Communications’ share price has surged 45% since July, when interest rate cuts began. It outperformed the telecom giants. However, the stock slipped 11% in December alongside other telecom stocks over fears of a slowdown in rate cuts. This dip has created an opportunity to buy the stock and lock in a 5.6% dividend yield.
goeasy
At a market cap of $2.7 billion, goeasy (TSX:GSY) is a sub-prime lender that offers auto loans, home loans, and retail point-of-sales loans in select regions of Canada. The lender is expanding its loan portfolio by expanding its borrower base and offering new types of loans while controlling its credit risk.
It forecasts to grow its loan portfolio from $4.6 billion in FY24 to $6.2 billion by FY26 and improve its operating margin from 39% to 42%. A larger loan portfolio means higher interest income, giving goeasy ample room to grow dividends. The lender has been growing its dividends at an average annual rate of 30% in the last 10 years. Such a high rate is difficult to maintain. Hence, I expect the dividend growth rate to slow to 20% in the next 10 years.
goeasy stock has slipped 20% since July, as interest rate cuts reduced its interest income. This dip has created an opportunity to buy the stock and lock in a 2.9% dividend yield.
10-year income from these two magnificent dividend stocks
The above two stocks are reacting differently to interest rate cuts. The yield of 5.6% and 2.9% may not be the most attractive. However, the real growth will come from the 8% and 20% dividend compounded annual growth rate (CAGR) in the next 10 years.
| Year | Cogeco Dividend per Share (8% CAGR) | Total Annual Dividend | goeasy Dividend per Share (20% CAGR) | Total Annual Dividend |
| 2025 | $3.69 | $641.71 | $5.62 | $348.19 |
| 2026 | $3.98 | $693.05 | $6.74 | $417.83 |
| 2027 | $4.30 | $748.49 | $8.09 | $501.40 |
| 2028 | $4.65 | $808.37 | $9.70 | $601.68 |
| 2029 | $5.02 | $873.04 | $11.65 | $722.01 |
| 2030 | $5.42 | $942.89 | $13.97 | $866.41 |
| 2031 | $5.85 | $1,018.32 | $16.77 | $1,039.70 |
| 2032 | $6.32 | $1,099.78 | $20.12 | $1,247.63 |
| 2033 | $6.83 | $1,187.76 | $24.15 | $1,497.16 |
| 2034 | $7.37 | $1,282.79 | $28.98 | $1,796.59 |
A $10,000 investment in Cogeco will buy you 174 shares that pay $641.70 in annual passive income in 2025 at a $3.69 dividend per share. If the company continues to grow its dividend by 8%, your dividend income could reach $1,283 by 2034.
Similarly, a $10,000 investment in goeasy will buy you 62 shares that pay $348 in passive income in 2025 at a $5.62 dividend per share. If the company continues to grow its dividend by 20%, your dividend income could reach $1,796 by 2034.
