By request, I have updated this article that was originally published in 2015. I included all dividend stocks that have at least a 15 year track record of increasing dividends, which brings it up to 18 in total (16 last year). This list will give you a good idea on some of the top dividend growth stocks in Canada.
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 18 Canadian dividend growth stocks with the longest histories of annual dividend increases. Why 18? I basically cut the list off of companies that have paid increasing dividends for at least 15 years. Usually, there is very little change in the list because companies who have a mandate to pay increasing dividends tend to follow that pattern.
Sometimes there are extenuating circumstances that cause the company to cut or even eliminate their dividend. This time around, there have been two companies, Home Capital Group (HCG.TO) and Ensign Energy (ESI.TO). HCG went through the ringer with fraud allegations and ESI earnings were wiped out by the prolonged oil and gas correction.
I have created a list below, but more due diligence is required before you buy as the only criteria I used is the number of years of increasing dividends. This list was created by combining sources from company websites, DividendInvestor.com, and Dividend Growth Investing & Retirement.
Top Dividend Growth Stocks on the TSX
As of October 2017
|Company||Symbol||Years of Dividend Growth||10 year avg Dividend Growth Rate||Payout Ratio||Current Yield|
|Canadian Western Bank||CWB||25||13.0%||42.11%||2.88%|
|Empire Company Ltd||EMP.A||22||7.7%||77.78%||1.86%|
|Canadian National Railway||CNR||21||16.5%||32.48%||1.63%|
|Canadian Natural Resources||CNQ||16||20.1%||79.14||2.67%|
As a disclaimer, I have positions in most of the stocks listed above. My holdings include CU,FTS, CWB, TRI, IMO, MRU, CNR, ENB, SNC, EMP.A, TRP, REF.UN, FTT, TCL.A.
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 companies with the longest history of dividend growth. For example, from the table above, there are some stocks with red flags such as the energy companies with high payout ratios.
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 (ie. utilities, financial services, consumer cyclical/defensive, energy, industrials, basic materials, real estate, communication services, and technology).
Notice how there are no big 5 banks or telecom companies on the list? Goes to show that in order to have proper diversification, you need more than just the history of dividend increases. Here is a more detailed article on how to build a 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 weekly money tips newsletter below (we will never spam you).