Two Companies That Provide Outsized Dividend Growth

A lot of investors see dividend paying companies as boring, below average investments. However, they are critical to maintaining a well balanced portfolio. You may have a portfolio comprised of high-potential growth stocks, but ultimately what is going to protect you from significant market volatility is steady, reliable income paying stocks.

More so, you should be looking for income companies that are consistently raising dividends. Dividend growth investing is a very popular investment strategy, and can give an investor a nice mix of income and growth.

So what do you need to look for? In particular, investors should look for companies with better than average 5 year dividend growth rates, long dividend growth streaks and most importantly, analyze if the company’s cash flows can maintain steady dividend growth.

Fortunately for you, I’ve found two of the best dividend growth stocks in the country today.

Goeasy Ltd (GSY.TO)

Goeasy Ltd (TSX:GSY) is a Canadian alternative lender that provides Canadian’s with alternative lending options over the major Canadian financial institutions. Goeasy has over 400 stores operating in its network, and operates under its two major segments, EasyFinancial and EasyHome.

Goeasy provides solutions to consumers who may have been rejected at a major financial institution, as they don’t have to follow strict regulations placed on major Canadian banks. Just recently, the company increased its loan range from $500-$15,000 to $15,000-$30,000, which is expected to be an $18 billion dollar market. Goeasy is planning to increase its total loan portfolio by over 35% in the next couple of years.

In terms of dividend growth, there isn’t too many companies in Canada that can match Goeasy’s pace. Goeasy has increased dividends for four straight years, and has a 5 year dividend growth rate of 21%. With this growth rate, Goeasy is on pace to more than double its dividend in the next 5 years. Most recently, the company issued a dividend increase that was well above its 5 year average, increasing it by a whopping 37%.

Goeasy’s payout ratio is one of the lowest in the financial industry at 24%, suggesting there is room for improvement on its already excellent growth numbers thus far. To add to Goeasy’s strong income, they give investors the potential to realize outsized gains as well, which is why we have named the company one of the best stocks to buy in Canada today. The company is trading at a forward price to earnings of only 10.04 and has a 5 year PEG of 0.77, suggesting the stock is undervalued relative to its future growth. Analysts expect Goeasy to post earnings growth of over 26% and sales growth of nearly 16% over the next year.

Canadian Natural Resources (CNQ.TO)

Canadian Natural Resources (TSX:CNQ) is a crude oil and natural gas company, one of the largest in Canada. The company has a strong history of generating significant cash flows and rewarding investors with rich dividend growth.

With 2 major acquisitions in the Canadian oilsands as of late, the company is positioning itself to thrive once the industry recovers. The oil and gas bear market has left this stock trading at very promising valuations, and for investors looking to get some exposure to the oil and gas industry, there may not be a better stock. 

Canadian Natural provides one of the best dividends in the country right now, with a yield of 4.07% and a payout ratio of only 56%. The company’s dividend is well covered, taking up only 48% of free cash flows. To add to its lucrative yield and dividend safety, the company is also raising dividends at a rapid pace. Canadian Natural is set to nearly double its dividend over the next 5 years with a 5 year dividend growth rate of 18%. 

The company’s most recent increase of 11% was well below its 5 year average, but it is something we can come to expect with the oil and gas industry struggling like it is. To go along with the best dividend growth rate in the energy sector, Canadian Natural provides significant upside at today’s prices.

Analysts expect the company to grow earnings by 11% and sales in the low single digits over the next year. The oil and gas giant is currently trading only at 13.9 times forward earnings and 1.26 times book value. Analysts are extremely bullish on the low cost producer, with all 24 rating the company as a buy. They have given Canadian Natural a 1 year target price of $47.47, which signals nearly 40% upside from today’s prices.