Dividend investing is a popular strategy these days, especially with low interest rates and not a lot of other options to obtain income from your hard earned savings. If you’ve been following Million Dollar Journey for a while, you’ll know that I’m a fan of dividend growth investing because it provides dependable stream of increasing income. For those of you interested in this strategy as well, you can see an example through my leveraged dividend portfolio. In fact, growing a passive dividend income stream is my strategy for achieving financial freedom.
A question that I often get is “what are my favorite dividend stocks?”. As a dividend growth investor, I like to invest in dividend paying companies that have a history of increasing their dividends. Unfortunately, the TSX has a limited number of stocks that have a long dividend growth history.
Doing some background research, I dug up 16 Canadian dividend growth stocks with the longest histories of annual dividend increases. Why 16? I basically cut the list off of companies that have paid increasing dividends for at least 14 years.
I have created a list below, but more due diligence is required before you buy as the only criteria I used is number of years of increasing dividends. This list was created by combining sources from company websites, DividendInvestor.com, and Dividend Growth Investing & Retirement.
As of November 9, 2015
|Company||Symbol||Years of Dividend Growth||5 year avg Dividend Growth Rate||Payout Ratio||Current Yield|
|Canadian Western Bank||CWB||23||14.43%||28%||3.5%|
|Empire Company Ltd||EMP.A||21||8.17%||34%||1.5%|
|Ensign Energy Services||ESI||20||6.56%||1,200%||5.5%|
|Canadian National Railway||CNR||19||17.49%||36%||1.6%|
|Home Capital Group||HCG||16||10%||24%||2.6%|
|Canadian Natural Resources||CNQ||14||29.4%||80%||2.7%|
As a disclaimer, I have positions in most of the stocks listed above. My holdings include CU,FTS, CWB, TRI, ESI, IMO, ENB, CNQ, SNC, and TRP.
For me, I like dividend stocks with a yield above 2.5%, a payout ratio less than 80%, strong financials, and, of course, an established track record of dividend increases. Once I create a dividend stock watchlist, I wait for them to drop in price to reach a particular dividend yield (when to buy dividend stocks).
As previously mentioned, more due diligence is required before blindly buying company’s with the longest history of dividend growth. For example, from the table above, there are some stocks with red flags such as ESI with a very high payout ratio and yield which appears unsustainable (especially at current oil prices).
If you are looking to build a portfolio of dividend growth stocks, some other considerations include market capitalization (ie. the size of the company) and diversification by sector (utilities, financial services, consumer cyclical/defensive, energy, industrials, basic materials, real estate, communication services, and technology). In a future article, I will put together my thoughts on an ideal diversified dividend growth portfolio.
Are you a dividend growth investor? Which are your favorite Canadian dividend stocks?If you would like to read more articles like this, you can sign up for my free newsletter service below (we will not spam you).