The best dividend stocks are those that are sustainable and growing. Dividend growth stocks can provide investors a very attractive total return mix (dividend income and capital gains). The smartest companies grow their dividend per share as their earnings/cash flow per share grow.
Compound income and capital
Stocks generally rise with earnings growth. Likewise, dividend increases tend to indicate solid business fundamentals that can help propel the stock. Investors who buy dividend growth stocks tend to receive compounding income from rising dividends and stock appreciation. It is the best of compounding from both aspects.
If you are looking for some of these quality dividend growth stocks, here are three to consider buying for 2026.
A top insurance stock for growing dividends
Intact Financial (TSX:IFC) has provided significant total returns for long-term investors. Its stock is up 217% in the past 10 years. Add in its dividends and its total returns are closer to 300% over that period.
Intact is Canada’s largest property and casualty insurance provider. With national scale, it has a pricing advantage over competitors. It can be cheaper for customers, but still earn strong underwriting profits.
Intact has raised its dividend for 20 consecutive years. Its dividend has grown by a 10% compounded annual growth rate over the past 10 years. Right now, Intact yields 1.9%.
A diversified provider of essential services
Exchange Income Corp. (TSX:EIF) has been another solid dividend stock. Its stock is up 198% in the past 10 years. Add in its dividends and investors would have a 434% return in that time.
Exchange operates a diverse mix of businesses, but its primary focus is on essential aviation services. Its operations are strategically located to cater to Canada’s north. With infrastructure and defence investments expected to bolster that region, Exchange could be primed for substantial growth.
Exchange has raised its dividend 18 times over the past 20 years. Given mid-teens projections for growth next year, it is likely to continue a strong dividend growth trajectory. Its stock yields 3.3% today and it pays out monthly.
A solid Canadian utility stock for dividends
AltaGas (TSX:ALA) stock is up 125% in the past five years. Add in dividends and you are looking at a 175% total return.
AltaGas is a critical natural gas infrastructure provider across Western Canada and the northern U.S. Its midstream operations have a tailwind of growth as Canada increasingly looks to export propane, butane, and liquified natural gases to Asia. Its U.S. utilities have above-average growth as it updates infrastructure and raises its rate base.
AltaGas has grown its dividend by a 6% annual rate over the past five years. That is despite its payout ratio drastically improving over that time. It yields 3.2% right now.
AltaGas is the more defensive name in this portfolio. Its returns are likely to revert to a mid-to-high single-digit range, closer to other utility peers. Yet, it doesn’t hurt to have a few very defensive names in any portfolio mix.
The Foolish takeaway on dividends
When looking for dividend income that can endure over the long term, seek dividend growth stocks with strong balance sheets, low payout ratios, and rising earnings that support rising dividends. Names like Intact, Exchange, and AltaGas are ideal picks for a solid total return profile.
