3 Top Dividend Growth Stocks For Now

Are you looking for stable growing income? If so, you should have these stocks on your radar. They offer sustainable yields of 4.5-5.6% with dividend growth potential of at least 5% per year.

High-growth utility with a 4.5% yield

Algonquin Power & Utilities Corp (TSX:AQN)(NYSE:AQN) has returned about 24.6% on the TSX in the last 12 months. The utility offers a U.S. dollar-denominated dividend which benefits Canadian investors no matter if they opt to receive its dividend in the Canadian or U.S. currency. For U.S. investors, Algonquin offers above-average growth in the relatively stable utility space.

Algonquin continues to execute. In Q1, its adjusted earnings per share increased 19% and its assets grew 94% compared to Q1 2016.

These are thanks partly to its acquisition of Empire, which added 218,000 new water, gas, and electric utility customers to its portfolio, as well as 1,400 MW of regulated electrical power generation.

wind-power facility

Photo: warrenski. License: CC SA 2.0 Source: flickr

Algonquin also put in service 210MW of net power generation capacity, of which 160MW has 20 years of power purchase agreements, which implies stable cash flow generation from those facilities.

The utility offers an above-average yield with an above-average growth rate. Due partly to the strength of the U.S. dollar, Algonquin yields 4.5% and aims to grow its dividend by 10% a year.

Thomson Reuters analysts have a mean 12-month price target of C$14.20 on the stock. So, it’s fairly valued. Investors looking for stable, growing income can consider the shares today. However, weakness in the U.S. dollar will bring the yield down for Canadian investors. Investors looking for a margin of safety¬† should wait until a pullback to at least the low C$13 level.

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Should You Buy Shopify Today?

Growth stocks shouldn’t be taken lightly. Just look at the Shopify Inc. [TSX:SHOP](NYSE:SHOP) stock to get an idea of what I mean. It has more than tripled in the last 12 months. You can’t argue against Shopify’s outperformance, except that it hasn’t turned a profit – yet. The company is expected to start making a profit as soon as late this year.

Shopping today is different from shopping 10 years ago. Nowadays, merchants may sell their products through their online store, their physical stores, marketplaces, social media, mobile apps, and other sales channels.

Shopify “provides (merchants) with a single view of their business and customers across all of their sales channels and enables them to manage products and inventory, process orders and payments, ship orders, build customer relationships, and leverage analytics and reporting from one integrated back office”. – 2016 annual report (pdf)

Rapid growth

Shopify’s growth strategies focus on growing its merchant base. At the end of 2016, Shopify had more than 377,500 merchants from roughly 175 countries using its platform with a strong focus in the United States. This suggests there’s much room for potential international growth in the future.

From 2013 to 2016, Shopify grew its revenue at a compound annual growth rate of 98%. This year, management expects to grow its revenue by 49-54% to $580-600 million.

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When Is It The Best Time To Buy O And The Others?

If you’re looking for income, check out the triple net lease space, which has experienced a nice pullback recently. Particularly, for¬†Realty Income Corp. (NYSE:O) and its two other peers, National Retail Properties, Inc. (NYSE:NNN) and Store Capital Corp. (NYSE:STOR), their shares have declined 14-25% in the last year.

I thought Store Capital was a good bargain at below $21 per share. Yet, in a matter of a few days, the shares have continued to fall another 5% or so.

In the last few days, all three companies have experienced pullbacks. So, there are some forces that are affecting the industry. The anticipation of higher interest rates (and rates actually rising) are some of them.

Realty Income shares have been the most resilient no matter in the price action of the last year or the last few days. This is not a surprise because as I said before, Realty Income is the bluest of the blue chips in the group.

After the pullbacks, the stocks offer decent yields of 4.6-5.8%.

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