Dividend stocks that raise their payouts regularly are a highly attractive bet in this environment. The smartest dividend stocks raise their dividend as profits and cash flows rise.
Source: Getty Images
Get capital and dividend compounding with dividend growth stocks
These stocks tend to have good pricing power, so they can grow their income (and payout) even when inflation is elevated. That helps protect the value of your income stream over time.
Likewise, if you are getting earnings per share growth, you are likely getting capital appreciation (especially over time). You get a compounding double-whammy. Your income compounds and your stock price compounds. It’s the best of both worlds.
If you are looking for some top dividend growth stocks, here are two Canadian stocks that just raised their dividend payouts.
This company has 33 years of dividend growth
Thomson Reuters (TSX:TRI) has been a Canadian tech titan for years. However, software stocks have come upon hard times. Its stock is down 32% this year and 51% in the past 52 weeks.
It has been one of the most impacted stocks from the artificial intelligence (AI) software apocalypse. Traditionally, this stock has traded at a premium to other software peers. Today, it trades at a more reasonable price-to-earnings (P/E) ratio of 20 times. That is the lowest valuation it has traded for in eight years.
Thomson provides professional data solutions such as financial analytics, legal software, and tax/accounting software. Over 80% of its revenues are recurring with a very minimal mix of transactional revenues.
Certainly, AI is a threat. However, for a trusted incumbent like Thomson Reuters, it is also an opportunity to provide new agentic solutions for its large customer base. If you can believe that narrative, the stock could be a buying opportunity given it is much cheaper today.
Thomson has raised its dividend for 33 consecutive years. It just raised its dividend in February by 10%. That is the fifth consecutive 10% increase. Today, it yields 2.8%, which is reasonably attractive here.
This stock has 36 years of dividend growth
Toromont Industries (TSX:TIH) is somewhat the counter investment thesis to Thomson Reuters. If you don’t want any AI-risk exposure, this could be a stock to hold. Toromont is a major provider of yellow iron and construction equipment in Eastern Canada.
Despite operating in a somewhat cyclical industry, it has been a long-term compounder. Its stock is up 104% in the past five years and 471% in the past 10 years.
It is benefiting from a very strong pricing environment for commodities. Sectors like mining and energy are thriving right now, and that is driving up demand for new equipment.
Likewise, the Canadian government has promised a streamlining of investments for nation-building projects. That should continue to push up demand for equipment maintenance, repairs, new equipment purchases, and leases. Its thermal management business has been delivering particularly strong growth and margin improvement.
Some of these positives are already reflected in the stock price. It is trading with a P/E ratio of 27, which is above its 10-year average of 21. You may want to be a little cautious about deploying a full position into this stock today, especially given that this industry can be a bit cyclical.
Toromont has a 57-year dividend history. TIH stock has raised its dividend for 36 consecutive years. In February, it raised its dividend by 7%. While it only yields 1.1% today, you could get a nice profile of income and dividend growth over a long period.
