Historically, dividend growth stocks have outpaced the broader markets. Companies with a growing dividend payout generally benefit from a widening earnings base, which results in consistent dividend hikes and long-term capital gains.
In this article, I have identified two quality TSX dividend stocks you can buy with $1,000 right now.
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EQB stock
Valued at $4.1 billion by market cap, EQB (TSX:EQB) pays shareholders an annual dividend of $1.88 per share, translating to a forward yield of 1.8%. Moreover, these payouts have risen at an annual rate of 18.7% in the last decade, significantly enhancing the yield-at-cost.
EQB provides personal and commercial banking services in Canada. Its loan products include residential mortgages, equipment loans, home equity, commercial equity lines of credit, and business enterprise solutions, among others.
EQB has outpaced its larger banking peers by a considerable margin, generating dividend-adjusted gains of 339% since October 2014. Notably, the company continues to grow its book value between 13% and 15% each year, generating a similar return on equity on the invested capital.
With over $125 billion in assets under management, EQB is the seventh-largest bank in Canada. EQB’s customer base increased from 27,000 in 2016 to 485,000 in Q3 2024, while its customer deposits rose from $1.1 billion to $8.9 billion in this period.
In fiscal Q3 2024 (which ended in July), it reported revenue of $327 million and adjusted earnings per share of $2.96.
EQB completed the acquisition of ACM Advisors, an alternative asset management platform, last year, diversifying its revenue base. In the July quarter, its non-interest income accounted for 17% of total sales.
Despite its market-beating returns, EQB stock trades at a reasonable valuation. Analysts expect the company to expand adjusted earnings per share from $9.40 in fiscal 2023 to $12.40 in fiscal 2025. Priced at less than nine times forward earnings, EQB stock remains the top investment choice in October 2024.
Hammond Power Solutions stock
Valued at $1.7 billion by market cap, Hammond Power Solutions (TSX:HPS.A) designs, manufactures, and sells custom electrical engineered magnetics, cast resins, liquid-filled transformers, and other products. The company serves oil and gas, mining, steel, waste and water treatment, commercial construction, data centres, and wind power generation industries in Canada and other international markets.
Hammond Power pays shareholders an annual dividend of $1.10 per share, indicating a forward yield of 0.8%. However, these payouts have risen by more than 20% annually in the last five years.
Hammond Power opened a new factory in Mexico in Q2, allowing the company to report record all-time shipments for the sixth consecutive quarter. The increase in shipping volumes meant that several facilities were reporting close to or at capacity.
In the last 20 months, Hammond Power has focused on adding equipment to existing factories, allowing it to consistently increase shipping volumes. This increased capacity resulted in 14% year-over-year top-line growth in the June quarter.
Hammond Power is forecast to end 2025 with adjusted earnings of $7.13 per share, pricing the stock at 20 times forward earnings. Analysts remain bullish and expect the TSX stock to surge over 15% in the next 12 months.
