Investing in quality dividend stocks with a growing payout is a proven strategy to build long-term wealth. In this article, I have identified two TSX dividend stocks you can buy now to benefit from a higher payout over the next decade. Let’s dive deeper.
Source: Getty Images
TSX dividend stock #1
Valued at a market cap of $11.9 billion, Element Fleet Management (TSX:EFN) has more than tripled investor returns over the past decade after accounting for dividend reinvestments. Despite these outsized gains, the TSX stock offers you a dividend yield of $2.5%, given an annual payout of $0.52 per share. Moreover, its annual dividend has risen from $0.10 per share in 2016.
Element Fleet Management reported double-digit growth across key metrics in the third quarter (Q3) of 2024 as the fleet management company expands its digital capabilities and prepares for a leadership transition.
In the September quarter, it posted adjusted operating income of $161 million, up 15% year over year, while net revenue grew 12% to $280 million. Adjusted earnings per share increased 12% to $0.29, driven by robust revenue generation and positive operating leverage of over 300 basis points.
“Our strong results speak to the strength and resilience of our business,” said Chief Executive Officer (CEO) Laura Dottori-Attanasio, highlighting the addition of 38 new clients in the quarter, with 42% coming from self-managed conversions.
In a significant strategic move, Element completed its acquisition of Autofleet on October 1, aiming to accelerate its digitization efforts in fleet management and expand into new value-added services.
The company also announced Heath Valkenburg, currently senior vice president and corporate treasurer, will succeed Frank Ruperto as CFO when he retires in March 2025. Looking ahead to 2025, Element expects net revenue growth of 6.5% to 8.5%.
On the capital return front, Element raised its annual common dividend by 8% and plans to be more active in share repurchases in 2025 after completing its preferred shares redemption program.
Priced at 24.5 times forward earnings, EFN stock remains reasonably valued and trades at a 10% discount to consensus price targets.
Dream Unlimited stock
A company operating in the real estate sector, Dream Unlimited (TSX:DRM) is valued at a market cap of $926 million. Down over 55% from all-time highs, Dream Unlimited offers shareholders a dividend yield of 2.5%. Moreover, analysts expect these payouts to increase by 16% over the next two years.
In Q3 of 2024, Dream Unlimited reported a pre-tax loss of $1.9 million, down from earnings of $11.4 million last year, though it remains optimistic about its growth trajectory and development pipeline.
The real estate investment firm’s CEO Michael Cooper highlighted strong momentum in Western Canada, where it has secured commitments for 520 lots and 109 acres through 2025, representing $191 million in revenue. Of this, $112 million is expected to be recognized in the fourth quarter.
“We expect to have one of our best years ever this year,” Cooper said. “We’re ending this year with the highest presales for future years we have ever had.”
Dream’s recurring income properties generated revenue of $18 million and a net operating income of $2.8 million, up year over year due to the stabilization of three Western Canada retail properties, which were 92% occupied at quarter-end.
Dream’s asset management division generated $15.1 million in revenue, and its assets under management have grown to $27 billion.
Dream plans to add 930 residential units by 2027, with the majority already under construction. It ended Q3 with a liquidity position of $257 million and a conservative leverage ratio of 39%.
“We’re going to end the year with quite a bit of liquidity,” Cooper noted, adding that Dream Unlimited expects to have its highest liquidity levels by Q1 of 2025.
Analysts remain bullish and expect the TSX stock to gain over 50% over the next 12 months.
