Dividend growth stocks can be even better buys than many of those higher-yielding dividend stocks, especially if you’re a young investor who has many years (or decades) to invest. Indeed, some of the TSX Index’s top dividend growers may not get nearly as much respect as some of their higher-yielding counterparts.
Indeed, if you need big passive income, elevated yields in the present are more tempting, even if the growth profile is lacklustre and the dividend growth prospects are somewhat limited. Either way, if you’re looking to set your future self up for a sizeable (and growing) income stream, I’d argue that doubling down on the proven dividend growers could prove a winning strategy.
It’s one thing to get a generous dividend yield. Still, it’s another to get a near guarantee of a mid-to-high single-digit raise every single year, independent of how the economy or the rest of the stock market is faring. Indeed, in the extremely long term (think more than 15 years), I’d argue that dividend growth investing is the way to go for those seeking the best of both worlds (capital gains and dividends).
Without further ado, here are two intriguing TSX dividend growth stocks that I think are more than worth buying in the fourth and final quarter of the year.
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Alimentation Couche-Tard
Alimentation Couche-Tard (TSX:ATD) is a convenience store icon that’s under a great deal of pressure right now, with new investors a bit concerned about what’s to happen with the potential 7-Eleven takeover. Undoubtedly, such an elephant-sized acquisition entails a massive amount of debt. Still, I don’t think that the burden will weigh too heavily on the firm’s ability to raise its dividend.
At the end of the day, the convenience store juggernaut is one of Canada’s top dividend growth rockstars. Though the 0.98% dividend yield isn’t all too rich, it is a tad on the high side. Should the stock sell-off continue into year’s end, I’d look to load up on the name as the yield surges past the 1% level. I think a 7-Eleven deal bodes very well for earnings (and dividend) growth over the long run.
TD Bank
TD Bank (TSX:TD) is not a very popular bank stock pick right now. Not after it was announced that the bank would have to pay a brutal US$3 billion worth of fines. Either way, I think the worst of the money-laundering fiasco is behind the bank. Now, the focus shifts to the new, incoming CEO and how he can make the bank a force to be reckoned with again.
While growth in the U.S. market may now be limited for some time, I do think there are opportunities on this side of the border to seize. Though recent penalties are quite stiff, it’s worth noting that TD still has a considerable amount of financial firepower. The only question is if any potential Canadian deals will be seized in the medium term.
In any case, I view the stock as a bargain, with its fast-growing dividend (currently yielding 5.2%) and modest multiple. Personally, I’m bullish on Raymond Chun and his abilities to bring TD stock back on the right track. I think he’s a fantastic pick to lead TD to new growth pathways.
