3 Dividend Stocks to Double Right Now

Dividends are a great source of passive income that can help you supplement your earned income. The good news is that it’s not difficult to identify and purchase a basket of dividend stocks that can help you generate this income stream.

There are several characteristics I look for when selecting good dividend stocks for my portfolio. First, they should be a highly cash-generating business and have a market-leading position that allows them to continue to generate healthy and growing free cash flow. They should also demonstrate a solid history of paying growing dividends over the years.

The key to increasing your dividend income is to regularly buy shares of these companies and then compound your dividends by reinvesting them in the same companies. Over time, the increase in dividends per share, along with a larger ownership stake in the company, will allow you to increase the amount of dividends you receive per year. The idea is to build a passive retirement income stream that you can comfortably count on in your old age. It’s not a difficult process to understand, but it does require patience and persistence.

Here are three dividend stocks that fit your criteria and can help you slowly grow your wealth over the years.

1. Enbridge

Enbridge (ENB 0.10%) Enbridge is a diversified energy distribution company with four principal divisions: Liquids Pipelines, Natural Gas Pipelines, Utilities & Gas Storage, and Renewable Energy. The company is a major player in the energy sector, delivering approximately 30% of the crude oil produced in the United States and transporting one-fifth of the natural gas consumed in the United States. This strong market position enables Enbridge to generate stable cash flows as it holds a dominant position in the energy distribution sector.

The company has seen its revenues rise and fall, from C$47.1 billion in 2021 to C$53.3 billion in 2022 and then to C$43.6 billion in 2023. Net income has been affected over the years by non-recurring items, as well as impairment of goodwill and long-lived assets, but has averaged about C$5.9 billion over the three years. Enbridge’s free cash flow, however, has been more consistent, rising from C$1.2 billion in 2021 to C$9.3 billion in 2023.

The company’s growing free cash flow generation has allowed it to continually increase its dividends over the years. Its most recent quarterly dividend was C$0.915, capping a 29-year streak of uninterrupted dividend increases at an annual rate of approximately 10%.

Enbridge has been paying dividends to its shareholders for over 69 years, which caps an impressive track record for the energy distribution company. Enbridge is expected to continue this dividend growth with the recent acquisition of three gas distribution companies to strengthen its operations, for which federal approvals have already been obtained. Its Renewable Energy division is also executing on the growth initiatives outlined at its Investor Day with several projects in the U.S. and Canada that have signed power purchase agreements with blue-chip companies such as Amazon and AT&T.

During the first half of 2024, Enbridge continued to deliver strong financial results with distributable cash flow of C$6.3 billion, up from C$5.9 billion in the prior year. Management’s focus on low capital intensity and utility-style growth means investors should continue to price in Enbridge’s dividend for years to come.

2. Home Depot

Home Depot (high definition -1.38%) is the world’s largest home improvement retailer, with 2,340 retail stores and more than 760 branches in 50 states in the United States, 10 provinces in Canada and Mexico. The company wields considerable influence in the retail industry and is a historic name that many rely on to find a wide variety of merchandise.

The company saw its sales remain flat from 2021 to 2023, rising from $151.2 billion to $152.7 billion, while gross profit remained flat between $50.8 billion and $51 billion due to inflationary pressures. Net income declined slightly from $16.4 billion in 2021 to $15.1 billion in 2023, mainly due to higher interest expenses as interest rates have surged over the past two years.

On a positive note, Home Depot’s free cash flow has remained consistently strong, averaging $14.5 billion per year from 2021 to 2023. This consistency has allowed the retailer to increase its dividend every year since 2008, with the last one being $2.25 per quarter, up 7.7% year over year.

The company once again saw its first-half 2024 earnings weigh on higher expenses, with net income falling 4.3% year over year to $8.2 billion. Free cash flow remained strong at $9.3 billion, on track to surpass its 2023 level of $17.9 billion. With inflation having eased over the past year, Home Depot should see rising expenses ease, taking pressure off its bottom line.

The company is also expected to see further growth, with Home Depot acquiring SRS Distribution, a commercial distribution company specializing in the residential sector, in March 2024 for approximately $18.25 billion. This should allow Home Depot to expand its offerings to better serve remodelers and renovators and will add $50 billion to the company’s total addressable market, bringing it to $1 trillion. While the transaction is financed primarily by debt and will result in a decline in earnings per share in the first year, management expects the purchase to be accretive to earnings starting in the second year.

Meanwhile, Home Depot opened four new distribution centers earlier this year to expand its ecosystem in Detroit, South Los Angeles, San Antonio and Toronto. These new centers will improve accessibility for their customers who need to access large and bulky goods and increase the company’s attractiveness while strengthening customer loyalty.

3. Nordson

Nordson (NDSN 3.33%) Nordson is a precision technology company that provides applications to the consumer, medical, electronics, and industrial industries. The company has a strong history of paying growing dividends and is one of the few Dividend Kings in the market. Nordson recently increased its quarterly dividend by 15% year over year, from $0.68 to $0.78, marking its 61st consecutive dividend increase and giving the company one of the longest uninterrupted streaks of increases.

The company has demonstrated consistent improvements in both revenue and net income over the years. Sales increased from $2.4 billion in 2021 to $2.6 billion in 2023, while net income increased from $454.4 million to $487.5 million over the same period. Free cash flow averaged $525 million per year from 2021 to 2023, and Nordson’s dividend payout ratio increased from just 22% to 31% during that period, which explains why the company was able to continue paying out more.

In the first half of 2024, Nordson continued its streak of free cash flow generation with $273 million generated. Net income for the half fell 1.7% year-over-year to $227.8 million, despite a 1.8% increase in revenue year-over-year as financial expenses more than doubled.

Despite this, the company only pays out 40% of its profits as dividends if we compare the latest annualized earnings per share of $7.90 to the annualized dividend per share of $3.12. This simple calculation shows that the company still has plenty of room to increase its dividend while reinvesting the majority of its profits into growth.

Nordson is also growing its business through acquisitions. The acquisition of ARAG was completed last August and helped expand the company’s reach in the high-growth precision agriculture sector. In May of this year, Nordson acquired Atrion Corporation for approximately $800 million to expand its medical portfolio into new markets and therapies. This purchase complements Nordson’s customer base and is expected to positively contribute to its results going forward.

With these growth drivers, Nordson appears well positioned to continue growing its earnings, free cash flow and dividends in the future.