2 of Canada’s Best Dividend Growth Stocks to Buy Today

WRITTEN BY Dylan Callaghan | UPDATED ON: September 29, 2021

canadian dividend stocks

Disclaimer: The writer of this article or employees of Stocktrades Ltd may have positions in securities listed in this article. Stocktrades Ltd may also be compensated via affiliate links in this post. Stocktrades Ltd will run advertisements on our posts. These advertisements do not represent an endorsement by us.

One of the most popular investment strategies is one that involves the consistent growth of the dividend. Although this can be looked at as a narrow-minded strategy as many think thorough company analysis is overlooked and too much emphasis is placed on the dividend alone, it's a well known fact that a consistently growing dividend goes hand in hand with an outstanding company in most cases.

There are many Canadian dividend stocks that excel at growing dividends along with providing exceptional capital growth for shareholders. We're going to look at two of them today.

Metro (TSE:MRU)

TSE:MRU dividend and share price information

Metro (TSE:MRU) might not be the fastest growing grocer in the country, but there's no doubt about it, it has the fastest growing dividend.

The company is tied with fellow grocer Empire Company (TSE:EMP.A) for the 7th longest dividend growth streak in the country at 26 years. The key difference between the two is simply the dividend growth rate. Over the last half decade, Metro has grown the dividend by 14.22% annually, and its most recent raise came in just shy of this amount at 12.22%.

Empire on the other hand has raised the dividend by about 5.33% over the last half decade, with its most recent raise outpacing that growth in 8.33%.

It's fairly impressive for a company to maintain a double digit dividend growth pace over that long of a growth streak, and it is a testament to the quality of the company. However, those on the western side of the country may not know of Metro. This is because over 70% of the company's operations are in Quebec.

Metro operates under many brands, its key ones being Metro, Super C, and Food Basics. A 2018 acquisition of drugstore company Jean Coutu not only expanded it into a different vertical, but also added another strong brand to the company's portfolio.

The company is able to consistently grow the top and bottom line despite having somewhat limited exposure across the country, and Metro is one of the most reliable Canadian dividend growth stocks in the country today. 

With earnings in 2021 expected to come in at $3.45 a share, the company's $1 dividend is well covered, making up less than 30% of expected earnings. And on a trailing basis, the dividend makes up only 23.6% of free cash flow.

The added bonus with this dividend grower is the fact it has been known to perform admiringly well during turbulent times. This shouldn't come as a surprise however, as many Canadians need groceries and drugs regardless of the economic circumstances.

Canadians also need energy and fuel. So which Canadian pipeline stock is best, between Pembina and Enbridge?

Alimentation Couche-Tard (TSE:ATD.B)

TSE:ATD Dividend and Share Movement Information

I often get criticized for highlighting Alimentation Couche-Tard (TSE:ATD.B) as a dividend stock, because it yields so little. However, I can immediately tell these critics have what I feel is a horrible habit of a dividend investor, and that is getting tunnel vision when it comes to dividend yield. This is an important distinction for one just learning how to buy stocks to make, additionally.

Alimentation Couche-Tard is one of the largest convenience store operators in the world, with operations in North America, Russia, Ireland, Poland, the Baltics, and Scandinavia. 

The company primarily generates its revenue through things like car washes, tobacco, groceries, quick service restaurants, and chemical products. However, the bulk of revenue is generated via fuel sales.

The company was impacted heavily during the pandemic, as travel was halted and people were forced to stay at home. So, what did Couche-Tard do? It managed to drive double digit EBITDA and earnings growth during quite possibly the most difficult times of its operating existence.

The company yields under 0.75%, but has an 11 year dividend growth streak. The company has grown the dividend by 21% annually over the last half decade, meaning the dividend has essentially doubled over this period of time. You might think its yield would be higher, but significant share price growth has kept it sub 1% for quite some time.

$10,000 invested in Couche-Tard a decade ago is now worth nearly $110,000 today. This blue-chip Canadian stock has provided ten bagger returns for patient investors.

In early 2021, the company faced some scrutiny over an acquisition attempt of French grocer Carrefour. This proved to be a huge buying opportunity, one we relayed to Stocktrades Premium members as a "can't miss" buy. The company is up over 32% since, and simply shows how irrational the markets can be over the short term.

Overall, I'd be comfortable adding Couche-Tard to my portfolio at any price level, but the company remains especially attractive at the time of writing. Trading at only 15 times forward earnings, this is below its median 3, 5, and 10 year averages.