3 Top Dividend-Growth Stocks to Buy When the Market Is Volatile

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Image source: Getty Images

Written by Rajiv Nanjapla at The Motley Fool Canada

Dividend growth stocks are those that have raised their dividends consistently. The solid underlying businesses and stable cash flows allow these companies to increase their dividends. Boosted by the dividend growth, investors can earn superior dividend yields on their original investment in 5 or 10 years. Also, good dividend growth stocks can deliver market-beating returns.

Here are three top dividend stocks that have raised their dividends consistently, thus making them excellent buys.

Enbridge

Enbridge (TSX:ENB) transports oil and natural gas across North America. It is also engaged in natural gas utility and renewable energy businesses. Given its long-term and inflation-indexed contracts and regulated assets, its financials are not highly susceptible to economic volatility. So, the company has been generating stable and predictable cash flows irrespective of the market environment, thus allowing it to raise dividends consistently. The midstream energy company has increased its dividends for the previous 28 years at an annualized rate of 10%. It currently offers an attractive forward dividend yield of 7.79%.

Meanwhile, the oil and natural gas transporter is progressing with its $19 billion secured capital growth projects. Along with these investments, organic growth, price increases, and optimization could drive its adjusted EBITDA and adjusted EPS (earnings per share) at an annualized rate of 4–6% through 2025. Further, the company is working on acquiring three natural gas utility companies in the United States. These acquisitions could further strengthen its cash flows while lowering its risks, thus creating long-term value for its investors. So, I believe Enbridge would be an astute buy in this uncertain environment.

Canadian Natural Resources

Second on my list would be Canadian Natural Resources (TSX:CNQ), which reported solid third-quarter performance earlier this month. Its average production volumes stood at 1.4 million barrels of oil equivalent per day (BOE/D) for the quarter, the highest in the company’s history. The record production in both liquids and natural gas boosted its production volumes. Supported by higher production and effective and efficient operations, the company posted adjusted net earnings from operations and adjusted funds flow of $2.9 billion and $4.7 billion, respectively.

Supported by its strong cash flows, the oil and natural gas producer raised its quarterly dividends by 11% to $1.00/share, the twenty-fourth consecutive year of dividend hikes at an annualized rate of 21%. With oil prices expected to remain elevated in the near-to-medium term and its continued capital investments, I believe CNQ will post solid financials in the coming years, which could allow it to maintain its dividend growth.

Fortis

My final pick would be Fortis (TSX:FTS), which meets the electric and natural gas needs of 3.4 million customers across Canada, the United States, and three Caribbean countries. With around 93% of its assets engaged in the low-risk transmission and distribution business, its cash flows are stable and predictable, thus allowing it to raise its dividends consistently. Last month, the utility company increased its quarterly dividend by 4.4% to $0.59/share, marking 50 consecutive years of dividend hikes. Its forward yield stands at 4.19%.

Meanwhile, the utility company has also provided a $25 billion five-year capital outlook from 2024–28, which is $2.7 billion higher than the 2023–27 plan. These investments could expand its rate base at an annualized rate of 6.3%. Amid these growth initiatives, the company’s management is confident of raising its dividends by 4–6% through 2028. So, Fortis would be a worthy buy for income-seeking investors.

The post 3 Top Dividend-Growth Stocks to Buy When the Market Is Volatile appeared first on The Motley Fool Canada.

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Fool contributor Rajiv Nanjapla has no position in any of the stocks mentioned. The Motley Fool recommends Canadian Natural Resources, Enbridge, and Fortis. The Motley Fool has a disclosure policy.

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