Dividend growth investing represents a powerful strategy for building long-term wealth and generating increasingly attractive passive-income yields. Unlike traditional investment approaches that focus solely on current yields, dividend growth stocks offer investors the potential for compounding returns that can outpace inflation and provide a growing passive-income stream throughout retirement.
The Canadian investment landscape presents unique opportunities for investors seeking reliable dividend growth. Selecting stocks with a proven track record of consistent dividend increases can be a game-changing approach to portfolio construction. These stocks not only provide regular income but also demonstrate financial strength, high management quality, and a commitment to boosting shareholder value.
Propel Holdings stock: A rising financial powerhouse
Online lender Propel Holdings (TSX:PRL) has emerged as an exciting dividend-growth opportunity that highlights the potential of strategic financial services companies. Over the past three years, the fintech company has demonstrated impressive financial momentum, initiating quarterly dividend payments in 2022 and rapidly increasing them with remarkable consistency.
Early investors have already seen substantial rewards. A strategic dividend strategy pushed annual dividends to $0.54 per share in 2024, translating to a remarkable 6.3% yield for those who invested three years ago. While current investors might see a more modest 1.4% yield at today’s stock prices, Propel Holdings stock’s strong fundamentals suggest significant future dividend-growth potential.
The company’s financial metrics tell a compelling story. With a robust 148% stock rally, a return on equity exceeding 38%, and a forward price-to-earnings (P/E) multiple of 12.2, Propel Holdings stock represents an attractive investment option for investors seeking both capital growth and higher passive income. The fintech stock’s low price-earnings-to-growth (PEG) ratio of 0.4 further suggests the shares could be significantly undervalued relative to their earnings growth potential, offering an attractive entry point for discerning long-term-oriented investors.
Premium Brands Holdings: A Dividend Aristocrat stock’s journey
Premium Brands Holdings (TSX:PBH) stock showcases remarkable dividend consistency despite challenging market conditions. This $3.6 billion food products manufacturer has maintained an impressive double-digit dividend-growth streak since 2015, raising payouts for 12 consecutive years through various economic landscapes.
Management has remained committed to shareholder returns, even during recent inflationary pressures that impacted the consumer discretionary sector. A 10.4% dividend increase in 2024 underscores this dedication. Notably, the company’s free cash flow payout rate remains below 60%, indicating substantial room for future dividend growth and financial flexibility.
The company remains optimistic about future revenue and earnings performance, anticipating sales recovery as inflation remains tamed and interest rates potentially decrease. Premium Brands stock’s ability to maintain double-digit dividend growth while continuously investing in productive capacity demonstrates a sophisticated approach to balancing shareholder returns and long-term business development.
Imperial Oil stock: Energy sector dividend-growth star
Imperial Oil (TSX:IMO) stock represents a testament to consistent dividend growth in the energy sector. With 30 consecutive years of dividend increases—including through multiple economic recessions—this $52 billion energy stock has proven its unwavering commitment to boosting shareholders’ passive-income streams by raising quarterly payouts every year.
The Canadian Dividend Aristocrat recently raised its quarterly dividend by 20% in 2024, averaging an impressive 32% dividend-growth rate over the past three years. Currently yielding 2.5%, Imperial Oil’s dividend strategy remains strong. Its ability to maintain dividend growth through volatile energy markets speaks to the company’s financial strength and strategic management.
As the company’s chief executive officer emphasized during a financial guidance call in December, Imperial Oil’s priority is maintaining a “reliable and growing dividend,” with plans to continue this impressive track record while repurchasing shares to boost total shareholder returns. Growth drivers, including production volume increases, higher refinery utilization rates and lower unit cash costs, position the company favourably to navigate a tariffs-threatened Canadian energy landscape.
Investor takeaway
Canadian dividend-growth stocks demonstrate that dividend growth investing isn’t just about current yields—it’s about long-term income generation potential. By selecting companies with strong financial positions, consistent cash flow generation performance, and a commitment to returning value to shareholders, investors can build retirement portfolios that generate increasingly attractive passive-income yields.
For Canadian investors seeking to build substantial long-term passive income streams, dividend-growth stocks offer a compelling investment strategy. They provide a unique combination of current income, potential capital appreciation, and a hedge against inflation.
