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3 Dividend Aristocrat Stocks to Buy and Hold Forever

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Past performance does not guarantee future results. It’s an important lesson that all investors learn sooner or later. Ironically, most stock analysis techniques, especially when it comes to fundamental analysis of stocks, rely quite heavily on past data.

That said, there are things you can look into when you are considering a company as a long-term holding: its dividend history, position in the industry, competitive landscape, balance sheet, etc. These things might help you make reasonable predictions about the company’s future and whether it would stay profitable for the next few decades.

A leader in the banking sector

Royal Bank of Canada (TSX:RY)(NYSE:RY) is one of the few stocks that you can buy and hold forever with relative certainty that it will be profitable for you in the long term. It’s the largest banking institution in the country and the fifth largest on the continent. It has been an Aristocrat for over nine years and has grown its payouts at a modest pace (36% in the last five years).

When digital banks started disrupting the sector, many people assumed it was the end of conventional banking. But major banks, with their online banking tools and platforms, still hold the majority of the market, and it’s unlikely to change anytime soon, especially in Canada, where banks are extremely stable. Royal Bank comes with a juicy 4% yield and decent 11.5% 10-year CAGR, which is quite sustainable for the long term.

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The oldest Aristocrat

Canadian Utilities (TSX:CU) often gets lost in the shadow of Fortis, one of the most revered utility stocks in the country, but it holds the distinction of being the longest-standing Aristocrat on the TSX. It has been growing its dividends for 48 consecutive years and will reach the “Dividend King” status by the U.S. standards soon. The reason it’s not usually the first pick from the sector is its relatively modest capital growth potential.

Still, it’s a remarkable Dividend Aristocrat and offers a very desirable 5.4% yield. It has grown its payouts by 33% in the last five years. It’s inherently safe as a utility stock, and if the company can capitalize on the green energy “shift,” it might also emerge as a decent growth stock as well. For now, it can serve as an adequately generous dividend stock that you can buy and hold forever.

A growth-oriented Dividend Aristocrat

If you want to add a bit more growth in the mix (and are willing to compromise on the yield), Canadian National Railway (TSX:CNR)(NYSE:CNI) might be considered a good pick. Its modest 1.6% yield comes with a powerful 10-year CAGR of 17.4%.  At this rate, a one-time $10,000 investment has the potential of growing to half-a-million dollars in fewer than three decades.

It has a dominant position in the transportation sector, and thanks to an extensive network of railway tracks that it controls and operates, it’s likely to stay that way. The company is regularly investing a significant amount of its profits into improving and enhancing its infrastructure and, by extension, keeping its competitive edge sharp.

Foolish takeaway

All three Aristocrats have powerful asset bases, dominant positions in the market, and stable clientele/consumer bases. Royal Bank and Canadian National Railway might even be considered “too big to fail” to a certain degree. They also offer a decent mix of growth and payout. Based on your investment goals, you can either choose to reinvest the dividends or start a dividend income.

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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Adam Othman has no position in any of the stocks mentioned. David Gardner owns shares of Canadian National Railway. The Motley Fool owns shares of and recommends Canadian National Railway. The Motley Fool recommends Canadian National Railway and FORTIS INC.

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