In times of uncertainty, defensive passive-income stocks tend to outperform. Reliable dividend stocks present a great way to collect a cash reward, even if the overall stock market is declining. While I am a growth-focused investor, I always like to allocate a long-term portion of my investment portfolio to defensive dividend stocks.
That way, if the market takes a downward turn (like it has lately), I can still collect a nice stream of dividend returns. Likewise, defensive stocks often act counter to the market, so the potential for capital upside is there as well. If you are looking for some bond-like security, but with a better yield, here are three passive-income stocks to just buy and hold for the long term.
TD Bank: A great stock for growing passive-income streams
Toronto-Dominion Bank (TSX: TD)(NYSE: TD) has been a great Canadian stock for growing streams of passive income. Over the past 10 years, it has grown its dividend by a compounded average annual rate of 9.6%. Last year alone, it increased its dividend by 13.9%! This passive-income stock only offers a 3.4% dividend yield today. Fortunately, its dividend-growth profile makes up for this.
TD’s stock is up 6% this year. However, the stock recently pulled back after it announced plans to expand further in the United States. It plans to acquire First Horizon for US$13.4 billion. Certainly, that is a hefty price tag. However, TD has proven itself effective at growing market share on the U.S. East Coast. The acquisition would make TD the sixth-largest bank in America.
Given TD’s strong balance sheet after the pandemic, this seems to be an attractive investment and a solid way to deploy its excess capital. All in all, the recent dip presents an attractive entry point.
Fortis: A shelter in the storm
Fortis (TSX: FTS)(NYSE: FTS) has also recently pulled back, and it is presenting an attractive entry point. While Fortis is not a fast-growing company, it has a long history of delivering for passive-income investors. There are very few stocks in North America that have raised their dividends annually for close to 50 years. Well, Fortis has. It has increased its dividend for 48 consecutive years. I don’t see signs of this trend stopping.
It operates essential power and natural gas transmission utilities across North America. These are vital, essential services, so Fortis captures a reliable baseline of cash flows. The company continues to invest in its utilities. It believes it can grow its rate base and cash flows by about 6% annually for the next three to four years. Chances are good that its dividend will grow at that rate as well. For a very low-risk, bond-like stock, Fortis presents a decent 3.6% dividend yield today.
Brookfield Renewables: A passive-income stock with long-term growth
With the onset of European conflict, concerns about energy security have risen. One Canadian passive-income stock that can help to offset these concerns is Brookfield Renewable Partners (TSX: BEP.UN)(NYSE: BEP). It is one of the largest pure-play renewable power stocks in the world.
It owns a large portfolio of very consistent, hydro power assets. However, it has a fast-growing development pipeline of wind, solar, battery, and distributed generation assets. Brookfield is positioning itself to be a key renewable power development partner with governments and corporations across the world.
Today, this passive-income stock pays a 3.5% dividend yield. It has grown that divided by around 5.7% every year. For passive income and a large growth opportunity, Brookfield Renewables is a solid stock to buy and hold for the long term.
