The only thing better than dividend stocks with juicy yields are dividend-growth stocks that offer a great mix of upfront yield and above-average dividend-growth prospects. Indeed, it’s not just about how much a firm can increase its dividend payout in any given year. Rather, it’s more about the consistency of dividend raises a firm under question is able to deliver.
Can the firm continue raising its dividend when times get tough, and the TSX Index falls into a bear market?
The firms with more than 10-15 years’ worth of annual dividend raises may not be Dividend Kings (that takes a whopping 50 years’ worth of dividend hikes to achieve!), but they definitely can help the yield based on your initial invested principal grow by leaps and bounds.
Indeed, an 8.9% dividend yield offered by a troubled telecom titan that I won’t name (you probably know which telecom firm I’m talking about already!) seems fantastic right about now. That said, I’d much rather have a 4-5% yielder that can grow its payout in the ballpark of 10-15% yearly, especially if I’m looking for a TFSA passive income portfolio mainstay.
Indeed, with such a dividend-growth stock at the core of your income portfolio, your yield (at least based on your principal) stands to get bigger every year. After a decade or two worth of dividend hikes, perhaps the payout will be rich enough to finance a rather comfortable retirement. Indeed, that’s the power of dividend-growth investing.
In this piece, we’ll look at one intriguing dividend grower that may become the primary income generator of your TFSA portfolio in a few decades. So, if you’ve got patience and want to set yourself up well for retirement, consider the following plays for the next 15 years and beyond.
CN Rail
CN Rail (TSX:CNR) isn’t exactly the most exciting stock in the world. It lacks innovation-driven growth, and it’s feeling quite a bit of pressure as the economy wobbles a bit. Still, it’s a wide-moat firm with a simple and easy-to-understand business model. Further, given its high barriers to entry, it’s also able to have fewer issues passing higher prices onto consumers.
Indeed, labour costs have risen considerably in recent years. Though railway strikes could cause some disruption, as they have in the past, I think that union woes and all the rest distract from the longer-term opportunity at hand.
Of course, CN Rail may not be a cutting-edge artificial intelligence play, but I do see it as a potential beneficiary from automation and the Internet of Things (IoT) in due time. Indeed, data is power, and as the firm looks to use such powers, perhaps it’s on track to unlocking another level of operating efficiencies. In the meantime, CNR stock looks cheap at 19.6 times trailing price to earnings, thanks in part to a recent correction in the name.
While the 2.1% dividend yield is relatively small for a dividend play, it is also poised to grow at a good rate every single year. The company’s 15-year dividend-growth rate is just shy of 14%. That’s generous! CN Rail truly is a dividend grower you can simply buy and forget about!
