Stock pickers looking to build their own diversified portfolio of companies have plenty of factors to consider. Whether that’s a given company’s growth rate, valuation, or dividend yield, maintaining balance within one’s portfolio is important.
That said, I’m going to focus on the dividend portion of one’s portfolio, and on which dividend stocks may make the best long-term holdings among this group. In my view, dividend growth can matter much more than the up-front yield investors get for investing in a particular name. Indeed, the rate at which dividend distributions grow over time is a factor many investors don’t spend much time on, but it is one I’d argue is among the most powerful drivers not only of passive income over time but also of stock price appreciation.
Here are three of the top dividend-growth stocks I think investors should consider right now.
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Scotiabank
One of Canada’s five largest banks, Bank of Nova Scotia (TSX: BNS) continues to be one of my top picks from a dividend perspective of the group.
Over the past decade, Scotiabank has raised its dividend by an average annual rate of 6.1%. That’s impressive, as is the company’s current 4.7% dividend yield.
Outside of financial crises or periods of time in which regulators have not allowed for dividend growth, Scotiabank has been among the most consistent dividend-growth stocks of its peer group. Much of this has been driven by strong growth via the company’s geographical diversification and focus on other markets outside of Canada.
Those thinking for the long term can’t go wrong owning this name, in my view.
Fortis
Fortis (TSX: FTS) continues to be my absolute favourite on the dividend-growth front.
This company’s annualized dividend-growth rate over the past decade has eclipsed the 6% level as well. And with a current dividend yield of 3.5%, this is a stock that provides meaningful income today for those looking to start out on their passive-income journey.
What really stands out to me as a key factor for investors to take into consideration is Fortis’s track record of raising its dividend over time. For more than five decades, the company has done so each and every year. That’s a run rate the company’s management team won’t want to mess with, and should ensure plenty of dividend growth moving forward.
For those looking for a picks-and-shovels way to play rising electricity usage thanks to AI and other key market trends, Fortis is a great way to do so over the long term.
Suncor
One company I don’t often highlight as a dividend-growth play (but is one of the best in the market) is oil and gas giant Suncor (TSX: SU).
Shares of Suncor have surged of late, despite a broader weakening in energy markets more broadly. Commodity prices have been coming down, so this chart is curious for those considering holding exposure to the energy sector.
To me, it appears to be Suncor’s underlying fundamental strength and its ability to produce solid earnings and cash flow in such environments that’s driving most of the upside in its stock. However, with a 3.8% dividend yield, a price-to-earnings ratio under 15 times, and an annualized dividend-growth rate of more than 8% over the last decade, this is a company that is both a growth, value, and dividend stock worth considering over the long haul.
