One of the most common mistakes investors make when looking to build a long-term portfolio is focusing too much on what a stock has done over the last six months or the last year.
And while that’s understandable because those are the headlines you constantly see — every day there’s another stock making new highs, another company posting strong earnings, or another investment that’s suddenly become popular — the best investing strategy isn’t about finding businesses that can have one or two great years.
It’s about finding companies that can continue growing through recessions, inflation, high interest rates, and whatever else the economy throws at them over the next decade or longer.
That’s why Fortis (TSX:FTS), for example, is one of the most popular and respected dividend stocks in Canada. It’s not the most exciting stock on the TSX, but it consistently protects and grows investors’ capital by both increasing its dividend and expanding its operations. In fact, over the last decade, it has earned investors a compound annual growth rate (CAGR) of roughly 10.8%.
That’s the kind of consistency long-term investors should be looking for, and it’s what you’ll often find in businesses that are so strong and profitable they can continue increasing their dividends year after year.
So, with that in mind, here are three more Canadian dividend stocks with impressive track records of consistent dividend increases.
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Another ultra-popular Canadian dividend stock like Fortis
In addition to Fortis, Enbridge (TSX:ENB) is another one of the best and most popular dividend growth stocks that investors can buy and hold with confidence.
And much like Fortis, a huge reason Enbridge has been able to continue increasing its payout year after year isn’t just because it generates reliable cash flow from its essential infrastructure assets. It’s also because the company maintains a conservative payout ratio, returning only roughly 65% of its distributable cash flow to investors.
That leaves Enbridge with plenty of capital to continue investing in new projects, expanding its operations, and growing its future cash flow, while still rewarding investors today with a compelling yield of roughly 5%.
And as new projects continue coming online, they increase distributable cash flow, helping support future dividend increases. This growth has created a cycle that has allowed Enbridge to consistently reward shareholders and increase its dividend annually for more than three decades.
Two reliable dividend growth stocks
In addition to Enbridge, North West Company (TSX:NWC) is another business that has quietly built an impressive dividend growth track record. The retailer serves many remote communities across Canada as well as international markets where competition is often limited.
So not only does it have a defensive business model with steady demand regardless of what’s happening in the broader economy, but it also operates in many jurisdictions where it has substantial market share.
Plus, it doesn’t just sell everyday essentials like groceries and household goods. Its locations also typically feature things like post offices, tax preparation services, and other essential services, helping keep its cash flow reliable even during more challenging economic periods.
That business model has helped North West consistently grow its earnings over the long haul while also rewarding shareholders with regular dividend increases. Currently, the stock yields roughly 3.2%.
Meanwhile, Canadian National Railway (TSX:CNR) is another ultra-reliable long-term investment that’s built an exceptional record of consistently increasing its dividend.
However, rather than paying out a large portion of its earnings, CNR retains significantly more cash to reinvest back into the business, with its current earnings payout ratio sitting below 50%.
That makes sense because, as one of North America’s largest railways, the company is constantly investing in its network to improve efficiency, expand capacity, and strengthen its competitive advantage.
So, while that means the stock offers a lower dividend yield today of roughly 2%, those continued investments have helped drive years of earnings growth, consistent dividend increases, and significant long-term capital appreciation.
Therefore, although it’s not a stock that investors buy purely for its dividend yield, its track record of consistent dividend increases highlights the resiliency of its business and helps explain why it’s such a high-quality long-term investment.
In fact, over the last decade, it has grown investors’ capital at a CAGR of roughly 10.2%, showing why, regardless of yield, stocks that consistently raise their dividends are some of the best long-term investments to consider.
