Dividend investing is one way to let your money make more money. If done over a longer time horizon, and if dividends are reinvested and not collected, the financial gain becomes a nest egg eventually.
The Toronto Stock Exchange is home to several Dividend Aristocrats that can turn $20,000 into $100,000 over time. Among the reliables are ATCO (TSX:ACO.X) and Cogeco (TSX:CGO). The former has raised dividends yearly for 30 years, while the latter’s record is 18 consecutive years. Besides the lengthy dividend-growth streaks, both stocks pay lucrative quarterly dividends.
Greater than the sum of its parts
ATCO provides essential services in sectors such as agriculture, energy, housing and shelter, logistics and transportation, real estate, and water. The $4.25 billion diversified global enterprise also has a 52.9% ownership stake in Canadian Utilities, TSX’s first Dividend King.
Management’s investment pitch is that ATCO is greater than the sum of its parts. The current operations and investments include natural gas pipelines, natural gas and natural gas liquids storage, and water infrastructure. In addition, the 77-year-old company has electric power lines, modular building manufacturing facilities, and ports.
The portfolio mix is a competitive advantage because the subsidiaries and affiliated companies deliver stable, growing earnings. In 2023, net earnings increased 2.13% year over year to $432 million, notwithstanding a challenging environment. ATCO’s executive vice president and chief financial & investment officer, Katie Patrick, singled out ATCO Structures for an unprecedented year.
According to Adam Beattie, president of ATCO Structures, the global base business expansion in 2023 was at the centre of growth. Besides the six new locations in the global space rentals business, the fleet size and units on rent grew significantly. The average rental rates also increased by 15%.
Patrick said Canadian Utilities remains a cornerstone investment in 2024, although ATCO has several strategic developments across the greater portfolio. If you invest in ACO.X today ($37.93 per share), the dividend yield is 5.17%.
Transformational quarter
Cogeco, a $574.5 million company, operates in the telecommunications and media sectors through two subsidiaries. Cogeco Communications provides residential customers with internet, video, phone, and business services. Its goal is to be a competitive force and grow market share in North America.
Radio broadcaster Cogeco Media has 21 radio stations in Quebec and owns Cogeco Nouvelles, the province’s largest private news agency. Management’s ongoing concern is growing the business organically, making attractive acquisitions, and innovating.
In the first quarter (Q1) of fiscal 2024 (three months ending November 30, 2023, revenue and profit declined 1.7% and 20.3% to $776.2 million and $98.7 million versus Q1 fiscal 2023. Notably, free cash flow increased 29.5% year over year to $141.8 million. Its president and chief executive officer, Philippe Jetté, said the first months of this fiscal year were transformational.
The highlight or important milestone was securing the wireless spectrum. Jetté said it was critical for the 5G technology, and Cogeco Communications’s wireless footprint now has 100% spectrum coverage. The goal is to execute a sustainable business model that generates value for all stakeholders. At $59.58 per share, CGO pays a 5.73% dividend.
The power of dividends
ATCO and Cogeco’s average dividend yield is 5.45%. Assuming you invest $10,000 in each and reinvest the quarterly dividends, the combined investment will balloon to $101,808.70 in 30 years. The figure could be higher as the example doesn’t include yet the dividend hikes within the period.
