Dividend growth stocks offer investors the best of everything. The best dividend growth stocks increase their dividends per share as they increase their earnings/cash flow per share. You don’t want dividend growth if it is not sustainable (just look at BCE or potentially Telus now).
The great thing is that as earnings rise, you tend to get capital appreciation. You get to enjoy a combination of rising stock price and rising income. Thusly, you get two forms of compounding.
Three quality dividend growth stocks that are yielding 3% or more today are AltaGas (TSX: ALA), Canadian Natural Resources (TSX: CNQ) , and Exchange Income Corp. (TSX: EIF). These stocks provide an attractive mix of income and share growth for the years ahead.
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AltaGas: A +3% yield and stable growth ahead
AltaGas is the ideal defensive stock to hold for a dividend growth strategy. It has been executing a turnaround strategy over the past five years. The turnaround is paying off. Its stock is up 121% in that time.
AltaGas operates two segments. American-regulated natural gas utilities provide a reliable stream of income. Smart investments should support 10% rate base growth in 2026. Its midstream business is benefiting from rising Asian demand for natural gas products.
AltaGas’ debt levels continue to decline. That just enhances the overall stability of its platform. The company expects to grow earnings per share by a 5% to 7% rate next year.
It has raised its dividend every year since 2020. Forward dividend increases are likely to rise in line with earnings growth. AltaGas yields 3.2% right now.
Canadian Natural Resources: A 5% yield for a dividend growth legend
Canadian Natural Resources is a Canadian legend when it comes to dividend growth. It has raised its dividend for 25 consecutive years by a 21% compounded annual rate!
That is impressive for any industry, but even more impressive in the cyclical energy industry. Canadian Natural Resources’ dividend growth is a testament to the quality of its business. It has some of the largest energy reserves in Canada and one of the lowest costs of production.
Consequently, the energy producer can generate substantive cash flow returns for shareholders, even when energy prices are depressed. In recent years, it substantially expanded its resource base and production capacity. CNQ stock is in a strong position to continue growing its dividend ahead. The stock yields 5.1% today.
Exchange Income: Growth and a growing 3.5% monthly dividend
Exchange Income Corp. is the perfect stock to hold if you want monthly dividends. It is also a great stock if you want a diversified business that provides essential services.
Exchange operates essential air services (firefighting, medical evacuation, freight, and passenger) to Canada’s remote northern communities. It also provides defence aerospace applications, aircraft leasing, manufacturing, and environmental access solutions.
The company is benefiting from several tailwinds like rising defence spending, nation-building projects, and a bigger focus on critical minerals and Canada’s north. The company is projecting mid-teens growth in 2026.
Exchange has raised its dividend 19 times over the past 21 years. That dividend has risen by a 5% compounded annual growth rate. Today, it yields 3.4%.
