Investing in high-quality dividend stocks, especially those that consistently increase their payouts at a higher rate, can help generate robust passive income over time. Investors should look for Canadian companies with strong earnings and cash flow growth. Notably, such fundamentally strong companies are more likely to pay and raise their dividends at a solid pace.
Against this background, let’s explore three high dividend growth stocks to start a growing passive-income stream.
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High dividend growth stock #1
Among the TSX stocks, goeasy (TSX:GSY) stands out for its very high dividend growth rate. The company consistently generates strong earnings, driven by its leadership in the non-prime leasing and lending market and a vast customer base. Over the past five years, both its revenue and earnings have surged at an impressive compound annual growth rate (CAGR) of about 23%.
Thanks to its double-digit growth in earnings and revenue, goeasy has paid dividends for 21 consecutive years and increased them for 11 years in a row. Most recently, the company raised its annual dividend by 24.8% to $5.84 per share, further boosting investors’ confidence. In February 2020, goeasy was added to the S&P/TSX Canadian Dividend Aristocrats Index, after growing its dividend at an impressive 42% CAGR over the previous five years.
The company’s stellar dividend payments and growth history, expanding margins, and growing earnings suggest that goeasy will reward its shareholders through higher payouts and capital appreciation.
Looking ahead, goeasy’s increase in consumer loan portfolio, growing mix of secured lending, disciplined underwriting, and operational efficiency will help maintain double-digit earnings growth, thereby driving higher dividends.
High dividend growth stock #2
Canadian Natural Resources (TSX:CNQ) is known for increasing its dividend at a solid pace. This oil and gas producer has never slashed or suspended its dividend. Instead, it has increased its dividend for the last 25 years at a CAGR of 21%. Beyond dividends, CNQ has also rewarded investors with solid capital gains. Over the past five years, the stock has grown at a CAGR of approximately 37%, delivering overall capital gains of more than 384%.
Looking ahead, CNQ appears well-positioned to keep rewarding investors with higher dividends. Its diversified portfolio of long-life, low-decline assets and balanced production mix of crude oil, natural gas, and natural gas liquids will generate strong cash flows, driving higher dividends.
Additionally, Canadian Natural’s portfolio of low-risk, quick-to-develop conventional projects offers solid growth opportunities ahead and can generate strong returns in the future. In addition, CNQ’s large undeveloped land base supports repeatable drilling programs, giving it room to grow in the future.
High dividend growth stock #3
AltaGas (TSX:ALA) is another high dividend growth stock. The company owns a diversified portfolio of energy infrastructure and rate-regulated utilities business, which helps generate steady and growing earnings. Notably, AltaGas’s earnings per share have risen at a CAGR of around 14% in the last seven years. Thanks to a growing earnings base, the energy company’s dividends have increased at a CAGR of 6% since 2021.
AltaGas looks well-positioned to continue rewarding its shareholders with higher dividends. The energy infrastructure firm anticipates its rate base to expand at a CAGR of 8% through 2029, which will support earnings growth and dividend payments. Management has set a target to grow dividends by 5–7% annually through 2029, while maintaining a sustainable payout ratio of 50–60%.
Going ahead, AltaGas’s low-risk, rate-regulated utilities business and long-term contractual arrangements are expected to continue providing stable earnings to support its dividend program. In addition, its Midstream segment will enhance the company’s resilience. AltaGas will further benefit from higher volumes, cost-control measures, and a focus on reducing its debt, which will strengthen its financial position and support long-term growth.
