For the dividend investors out there who are growing a bit concerned that yields could be coming down as interest rates fall, there are some intriguing dividend growth names out there that I think can continuously grant shareholders with consistent raises every single year. So, if you’d much rather have steady annual payout hikes rather than a large upfront yield, the following names, I think, are even more deserving of a spot in your TFSA, RRSP, or even non-registered account (remember that dividend tax credit).
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National Bank of Canada
National Bank of Canada (TSX:NA) has been a relatively modest performer so far this year, up just over 15% while most other banks are up closer to 25% year to date. Indeed, National Bank’s impressive breakout rally began all the way back in late 2023 while most of its big bank peers were still under significant pressure. In any case, NA stock still stands out as a great retail bank play for investors who want greater exposure to domestic banking.
The stock looks cheap at 14.9 times trailing price-to-earnings (P/E), though it’s not the cheapest name of the Big Six cohort. The 3.1% dividend yield also leaves a lot to be desired. Still, I find the main reason to stick with National Bank is for the relative growth and, of course, the dividend growth profile.
The bank is relatively small with a market cap under $60 billion, leaving more room to the upside if it can steadily expand. With National Bank making some very smart acquisitions, I must say NA shares are a name I expect to be close to the top of the pack when it comes to performers in the Canadian banking scene.
CP Rail
CP Rail (TSX:CP) or Canadian Pacific Kansas City (CPKC), as it’s known nowadays, has been on an underwhelming run in the past two years, up just 8% while the TSX Index has surged to a double-digit percentage gain. Indeed, it’s not just CP that’s felt the headwinds. Most North American railways have been up against it in recent years.
Believe it or not, CP stock hasn’t had it the worst amid mounting industry pressures. In any case, the stock looks quite fully valued, even expensive at 24.1 times trailing P/E, given where the rail industry is at going into the fourth quarter. Indeed, the tariff disruption has weighed, and it’s uncertain when such issues will go away. In any case, I think the stock is a great long-term dividend growth candidate for those willing to step into the name at $107 and change per share.
While CP is growthier than its rivals, it’s also pricier with considerable tariff risk that investors should consider carefully before buying. The 0.84% yield is also quite small. Though I believe CP makes up for it with its dividend growth profile. If things go right for a change, CP stock could get back on the rails. Until then, investors may wish to play this one cautiously, with incremental buys over the next six months or so.
