Still working on achieving its dividend: 1 Canadian stock that I would grab immediately

Finding a dividend stock with a history of high payouts is one of the smartest ways to build lasting wealth. It indicates that a dividend stock is consistently growing earnings, managing debt responsibly, and rewarding shareholders year after year. Regular dividend increases not only protect your income against inflation, but also increase your return on costs over time. The longer you hold it, the more your original investment will pay you back. And above all, this dividend stock could be a great option.

HPS

Hammond power solutions (TSX:HPS.A) is one of those rare industrial stocks that combine growth, income and resilience. Right now, it looks like one of the strongest dividend opportunities on the TSX. While many investors have focused on big names in the energy and financial sectors, Hammond has quietly become one of Canada’s top-performing manufacturers, consistently growing both profits and dividends.

Hammond Power builds custom electrical transformers and energy systems used in a variety of sectors, from manufacturing and data centers to renewable energy and electric vehicles (EV). These are not short-term products, but mission-critical components in the power grid and industrial infrastructure. That makes Hammond’s business both stable and essential. As electrification accelerates worldwide, demand for transformers and energy management equipment has soared, and Hammond has been able to efficiently leverage that growth.

Numbers don’t lie

Financially, Hammond’s recent performance has been exceptional. In the third quarter of 2025, the dividend stock reported revenue of $218 million, its second-highest quarter for shipments ever. Net profit was $17.4 million, with the order book now 27.7% higher than at the start of the year. Gross margins remained strong at over 30%, while data center activity accelerated in the quarter, recovering 53% of the deficit. This operating strength has allowed Hammond to pay down debt, strengthen its balance sheet and reinvest in expansion – all while continuing to boost shareholder returns through dividend increases.

And those dividends have risen rapidly. Hammond has increased its quarterly dividend several times over the past two years, most recently to $1.10 per share per year, for a yield of about 0.62%. That may seem modest at first glance, but what makes it powerful is the growth rate. The company’s dividend has almost tripled in just three years, and with a payout ratio still just 16% of earnings, there’s plenty of room for further increases. This combination of strong earnings growth and a conservative payout gives Hammond one of the healthiest dividend profiles on the TSX.

There’s more to come

The outlook for the dividend stock is equally strong. Hammond continues to benefit from global electrification, renewable infrastructure and artificial intelligence (AI)-driven data center growth. All this requires large-scale, reliable transformers and power distribution systems. It is expanding production capacity in both Canada and the US to meet rising demand, and is doing so without overexpanding financially. This disciplined growth strategy sets Hammond apart from more volatile industry peers. It grows within its means and ensures dividends remain sustainable even as the economic cycle slows.

From a valuation perspective, Hammond still looks attractively priced, despite the impressive rally over the past two years. The stock trades at about 22 times forward earnings, a discount to global industrial peers, even as profitability and return on equity continue to rise. For investors who prefer to buy quality companies before they become household names, Hammond offers a rare combination of growth, income and undervaluation.

In short

In short, Hammond is a dividend stock worth grabbing right now because it does everything right. The dividend stock provides growing profits, higher dividends and capitalization on long-term structural demand. Management has shown remarkable consistency, the balance sheet is impeccable and the end markets are flourishing. In fact, this is what a $7,000 investment today could earn in dividends alone.

All in all, this is a stock that not only pays you, but also gives you a pay increase every year, while you benefit from the global transition to cleaner, smarter energy systems. For investors looking to build reliable, growing income from an overlooked Canadian industry, Hammond Power is exactly the kind of gem that deserves a place in a long-term portfolio.