Who doesn't love a steady stream of dividend income? A little extra money can go a long way toward fulfilling your wants and needs.

But not all dividend stocks can help you achieve that. When selecting dividend stocks, it is essential to look at the growth potential of a company along with its yield to avoid losing your hard-earned money. Let's discuss two stocks that not only offer steady dividends, but also attractive growth prospects.

Two cheerfully amazed people in cap holding in hands large sum of money isolated on blue color background.

Image source: Getty Images.


McDonald's (MCD 0.88%) is one of the few companies that can boast about its consistent growth, not over years, but decades. The fast food giant's popularity gives it a moat that's difficult to break. This has allowed McDonald's to grow its bottom line consistently over the years.

MCD Revenue (Annual) Chart

MCD Revenue (Annual) data by YCharts

As the company grew internationally, it became increasingly difficult for it to own and operate its own stores. So, it shifted its model from owned stores to franchising, and currently 93% of McDonald's outlets are franchised. The fall in revenue in the chart above is due to the shift to franchising, and not due to falling customers.

McDonald's stock offers a yield of around 2.2% and has increased its dividends for 44 consecutive years. 

MCD Dividend Yield Chart

MCD Dividend Yield data by YCharts

As the above graph shows, McDonald's consistent growth reflects in its stock price too. Including dividends and price increases, investors earned annualized returns of nearly 15% over the last 10 years.

McDonald's 2020 earnings were severely affected by COVID-19. However, unlike dine-in restaurants, McDonald's drive-thru service allowed it to remain profitable even during the pandemic. The company recently reported a 4.6% comparable sales growth in its key U.S. market in the third quarter. McDonald's has been making rigorous marketing efforts to grow in the U.S., where it has been experiencing weakness in the last couple of years. Though the comparable guest counts remained negative for the quarter, the company benefited from strong average check growth.

McDonald's didn't fare that well in international markets, though, in the third quarter. It saw comparable sales slipping in several European markets as well as in China. As countries continue to recover from COVID-19, McDonald's international sales should recover, too. Overall, McDonald's comparable sales were down just 2.2% in the third quarter, compared to a 23.9% drop in the second quarter.

With the worst behind, the company looks all set to grow again. McDonald's long streak of dividend growth and its strong moat makes it a must-own stock for dividend lovers.

TC Energy

Canadian energy giant TC Energy (TRP 1.46%) is one of the few energy companies that is largely insulated from the turmoil in energy markets. That's because roughly 95% of the company's earnings come from regulated assets or are backed by long-term contracts.

It is precisely this low-risk business model that has allowed TC Energy to grow its dividends for 20 consecutive years. This period includes the 2008 financial crisis, as well as the commodity price rout of 2014 to 2015. What's more, the company expects 8% to 10% growth in its dividends in 2021. Beyond that, it expects to grow its dividends by 5% to 7% annually.

TC Energy's capital projects should help drive its earnings and dividends growth. The company has a capital program of roughly $37 billion Canadian dollars that it plans to finish by 2023. The projects are secured, which means TC Energy already has committed customers for a major chunk of these projects. It placed CA$3 billion of projects into service in the first half of 2020. This includes CA$2.9 billion of the CA$9.4 billion NGTL system. The gas gathering and transportation system will connect growing supply in the Western Canada Sedimentary Basin (WCSB) to domestic and export markets.

TC Energy's earnings remained robust even in the first half of 2020. That allowed the company to keep its earnings outlook for the year unchanged from that provided at the end of 2019. 

With a debt-to-EBITDA ratio of around 4.6 times, TC Energy's leverage isn't a major concern at this point. In the second quarter, TC Energy's cash generated from operations was roughly double the amount it paid as dividends. The stock is trading at a yield of around 5.5%, which is much higher than its 10-year average yield of 4.1%.

All in all, with an impressive track record, reasonable leverage, strong coverage, notable projects pipeline, and attractive dividend yield, there's a lot to like about this stock.