For value investors seeking the perfect balance between growth and passive income, dividend growth stocks with long track records of annual increases are the way to go, at least in my humble opinion. At the end of the day, if you’ve got a long time horizon (let’s say between five and eight years, or maybe a bit longer), the priority should be the total returns. In any case, upfront yield has its draw for some older investors who need extra cash now and are in a lower tax bracket in (or very close to) retirement.
For everyone else, though, I think it’s well worth it to prioritize dividend growth. Indeed, some of the market’s most respectable and unpredictable performers have rich dividend-raise histories to back themselves up.
And, in this piece, we’ll check out two names that I think remain fairly valued to moderately cheap. In a frothier market climate, I’d say that’s the best zone to fall into, especially since extra caution should be taken with the names that have been nosediving in one of the most robust bullish ascents we’ve seen in recent memory.
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TC Energy
TC Energy (TSX:TRP) stock has nearly doubled in the past two years. With its impressive natural gas pipelines generating ample cash flow as the firm looks to expand capacity to prepare for what could be insatiable demand as the AI data centre buildout moves ahead, it’s hard not to justify the now quite hefty 29 times trailing price-to-earnings (P/E) multiple.
Like it or not, TC Energy is worth more than $100 billion now. And while the yield is lower, at 3.6%, than historical averages, I still view the firm as a premier dividend growth play that’s worth sticking with. If you can nibble your way into a long-term position on dips, that’s what I’d look to do. Though I’m also not against paying the premium right here if the dividend and much-improved fundamentals entice you. In my view, it’s a fair price to pay for a juggernaut of a cash cow.
Canadian Natural Resources
Canadian Natural Resources (TSX:CNQ) is a stellar bet for energy investors looking to take advantage of the recent pullback in oil. At 11.8 times trailing P/E, the shares aren’t priced with much in mind.
When you consider the firm’s operating advantages and how it has used its size to its advantage ($125.6 billion market cap), only then does it become more apparent that CNQ is an excellent go-to, whether it’s for income or long-term growth.
The 4.2% yield is rich, and the dividend looks set for more of the same: robust growth every year. Big energy might be a tad more volatile, but, in my view, it’s worth riding out the waves, especially if you’re overweight in tech and underweight in some of the key producers that are so critical to the Canadian economy. With the balance sheet improving and promising projects ahead, CNQ is one of the names to stash, regardless of what geopolitical news does to oil prices.
