2 Canadian Dividend Stocks That Increase Payments Over Time

If you had a choice to earn $10,000 per year for a decade or $6,500 a year now and grow it by 10% every year for a decade, which one would you choose? The first option is beneficial for the first five years, but something that doesn’t increase over time stagnates. As you can see from the table below, the second option puts you at an advantage from the sixth year onwards, and the advantage keeps increasing. A similar scenario is evident with dividend stocks that grow dividends every year.

The above scenario doesn’t mean stocks that give stable dividends are a bad option. If you are looking to park surplus money, such as an annual bonus or down payment for your house, for a few months or a year, the first scenario is beneficial. If the need for passive payments is still five to seven years away, such as building a retirement income, the second scenario is beneficial.

If you are looking to invest in the second scenario, here are a few stock picks for you.

Two dividend stocks that increase payments over time

At a time when rising unemployment and economic slowdown stagnated income and reduced consumer spending, two dividend stocks kept increasing payments. They have an advantage of being the largest in areas critical to the Canadian economy.

Canadian National Railway stock

Canadian National Railway (TSX:CNR) connects Canada’s Eastern and Western coasts with the U.S. Midwest and the Gulf of Mexico. It earns money from transporting bulk, merchandise, and consumer products. Given that Canada is an export-led economy, the rail network helped Canadian National Railway earn regular cash flow. It kept increasing its rail infrastructure, and cash flows grew.

However, the company has been facing some headwinds. Last year, labour issues disrupted operations and pulled down earnings. This year, tariffs reduced volumes in metals and minerals.

The company is managing the tariff situation by reducing capital spending, cutting costs, and focusing on domestic volumes. Moreover, reduced fuel costs, an increase in freight charges, and gains in foreign exchange helped it decrease expenses and increase earnings per share (EPS) by 1.6% year-over-year in the second quarter of 2025. It is also continuing with the share buyback that could be incremental to EPS.

In light of recent challenges, Canadian National Railway has reduced its 2025 EPS outlook from 10–15% to mid-to-high single digits. However, the company is well placed to keep paying and growing its dividends. It has grown dividends at an average annual rate of 14% in the last 20 years and can continue doing so for the coming years. However, the dividend growth rate may slow down till these headwinds subside.

CNR is my stock pick because of the resilience the company has shown in the 2007 Financial crisis, the 2016 oil crisis, and the pandemic, when the economic growth slowed. The company slowed its dividend growth rate amid the economic crisis and accelerated it when business was good.

Canadian Natural Resources

Canadian Natural Resources (TSX:CNQ) is another critical business for the Canadian economy. Canada’s biggest export is oil and natural gas, and CNQ is the largest Canadian oil and gas producer. The company benefits from its large, low-maintenance reserves. The energy producer controls its production depending on the WTI crude price. It shifts the product mix between WTI and Synthetic Crude Oil.

Like the railway, Canadian Natural Resources has continued to grow dividends for 25 years. It sustained the growth by incorporating dividends in its breakeven cost per barrel. CNQ has a fluctuating dividend growth rate, but it ensures there is some growth. Take, for instance, the 2016 oil crisis that pulled down oil prices to US$40/barrel for a brief period and reduced the average cost from US$100 to US$60/barrel.

The company’s resilience to grow dividends makes it a stock to buy and grow your income over time.