Best Dividend Growth Stocks – Focus On 10% Dividend Growth

Dividend Earner

Dividend Earner

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3 min read Affiliate Disclosure

Many investors like a process that simplifies the chaos of the stock markets. To that end, financial institutions create indexes and stock lists based on a pre-determined set of criteria to satisfy investors’ demands. However, it’s not about making you rich but about filling a gap based on what investors “think” they want.

For example, there is a Canadian Dividend Aristocrats list or a BMO Monthly Income Fund. There are other lists, but none are as refined as what you are about to read. The best Canadian stocks are often the gems investors don’t talk about.

As it happens, a DIY dividend investor, like myself, works outside of those lists by establishing a more rigorous process to select the next dividend growth stocks as an investing shortlist.

The Dividend Aristocrats, on both sides of the border, were an initial step in my dividend investing journey, but I have since established a more rigorous set of criteria that helps me narrow down a strong set of companies to surface the best dividend growth stocks.

I have included a comprehensive list of Canadian dividend growth stocks with many important key dividend metrics in the Dividend Snapshot Screeners to help investors make informed investment decisions.

However, one key discussion point I regularly have around the Canadian Dividend Aristocrats is how poor the criteria are for including a stock in the list. Investors use those lists to filter out stocks. It’s an important process to go from 1,000 companies to less than 100, but I don’t think it’s enough.

While you can break it down by sector or industry, you want to filter out the great businesses from the others. You also want to filter out the companies that match the simple criteria of increasing dividends yearly by 1 cent. Where is the growth for a dividend growth investor?

Since 2009, I have been working on my criteria for selecting stocks. While I usually select 90% of my holdings using the Dividend Ambassadors strategy, the technology sector has usually thrown in a curve ball where instinct comes in.

My Favourite Dividend Growth Stocks

Note that you need access to unique dividend data to screen dividend stocks. Not many screeners focus on dividend data. You should consider a screener such as Dividend Snapshot Screeners.

1. Alimentation Couche-Tard

Alimentation Couche-Tard is one of the largest Canadian companies and the owner of several Canadian convenience stores. The company also supplies road transportation fuel to approximately 1,300 locations in the U.S. and offers stationary energy and aviation fuel.

As a leading independent convenience store operator, Couche-Tard owns a network of nearly 10,000 convenience stores in 48 states in the U.S., ten provinces in Canada, as well as other countries.

It operates more than 16,000 stores worldwide. By geography, the US is its largest market accounting for 67% of 2018 revenues, followed by Europe (20%) and Canada (13%). The company operates through Couche-Tard and Mac’s brands in Canada and Circle K globally.

Key Investment Data

  • Ticker: TSE:atd
  • Sector: Consumer Defensive
  • Industry: Grocery Stores
  • Market Cap: 72.53B
  • Market Cap Group: Large Cap
  • P/E: 18.45
  • Dividend Yield: 0.93%

2. Canadian National Railway

Canadian National Railway is a leading transportation and logistics company in North America. The company owns the only transcontinental railway line in North America and provides intermodal, trucking, freight forwarding, warehousing and distribution services.

As North America’s leading supply chain player, Canadian National Railway carries more than 300 million tons of cargo annually. It is a fully integrated rail and transportation services company and is the top mover of aluminum, iron ore and base metal ore in North America.

Canadian National handles over 50% of all Canadian chemicals production and services the three major petrochemical centers in North America. Its product portfolio is well diversified with intermodal accounting for 25% of revenues, followed by petroleum & chemicals, and grains & fertilizers each at 17%. Forest products, metal, minerals, automotives, etc. constitute the remainder.

Key Investment Data

  • Ticker: TSE:cnr
  • Sector: Industrials
  • Industry: Railroads
  • Market Cap: 110.18B
  • Market Cap Group: Large Cap
  • P/E: 20.47
  • Dividend Yield: 1.95%

Dividend Ambassadors – Best Dividend Growth Stocks

Dividend Ambassadors Stamp

I would like to introduce the Dividend Ambassadors where a stock needs to meet the following 2 simple criteria to surface the best dividend growth stocks:

  • Have increased their dividends for 10 consecutive years. It guarantees the company can go through a full economic cycle and maintain profitability and growth.
  • Have grown their dividend by 10% on average over the past 10 years. It guarantees the company continues to be profitable, manage cost and still provide a meaningful return to shareholders.

Once a stock matches the criteria, it earns the stamp of honour. It is actually quite an achievement to be included on this list, so take note of these dividend blue-chip stocks.

Sadly, the best Canadian banks do not pass the criteria, and neither do the favourite Canadian utility stocks.

Canadian Dividend Ambassadors

US Dividend Ambassadors