Many characteristics and adjectives can be used to define a good dividend stock. A high-yield, financial sustainability, dividend growth, and capital growth are the four big ones. Realistically, you can’t get all of them in one stock, unless the market conditions are just right, and you snap the stock up at the perfect time.
So, you have to prioritize, and if your chief priority is dividend sustainability — i.e., stocks that have the potential to offer you a steady passive income for decades — the best place to start would be the blue-chip stocks with the distinction of being Dividend Aristocrats.
A telecom company
BCE (TSX:BCE) is not just any telecom company; it’s the largest player in the Canadian telecom space by market cap. This large-cap company has a powerful presence in Canada and millions of subscribers across multiple business lines. It’s also growing its sphere of influence as a 5G company and aiming to achieve higher penetration in the market.
This makes BCE a giant in its industry with products/services that millions of Canadians rely upon daily. Imagine one day without the internet to realize how important BCE and other telecom companies are. This importance will only increase with the advent of IoT and our reliability on smart devices.
As a well-established company with a strong business model and positive future outlook, BCE is a compelling stock to hold long term, especially considering its dividend potential. It’s a Dividend Aristocrat currently offering a juicy 6.35% yield that you can lock in and enjoy for decades.
An energy company
When it comes to generous and relatively reliable dividend stocks, energy is one of the most coveted sectors in Canada. There are a number of amazing options, but if your focus is long-term dividend sustainability, TC Pipeline (TSX:TRP) is among the few that might fit the bill for two primary reasons.
The first is its business model. As a pipeline company, its financials are less vulnerable to energy price fluctuations than other energy companies. This goes both ways (growth and slump) and is also reflected in the stock’s performance.
On top of a reliable business model, it’s an established aristocrat that has grown its payouts for over two consecutive decades and is currently offering a compelling 6.7% yield. This makes it one of Canada’s best energy stocks you can buy for dividends.
A utility company
When it comes to a stable business model, utility companies take the cake (and share it with a few other industries). This makes companies like Nova Scotia-based Emera (TSX:EMA) a reasonably attractive dividend investment for a long-term passive-income portfolio. The company boasts 2.5 million utility consumers, mostly electricity (83%).
It’s also a geographically diversified business relying more on the U.S. market (Florida) than its Canadian consumers for revenue. Over 60% of its revenue is generated from Florida. This gives the company an edge over utility companies vulnerable to local headwinds, which are rare in the utility sector.
The company is a decent buy for its dividends and growth, but more so for the dividends. It has grown its payouts for 15 consecutive years and offers a decent 5.1% yield.
Investing in Aristocrats doesn’t just guarantee a passive income (to a reasonable degree) a sustainable passive income for decades but can also help your income stay ahead of inflation. Even Aristocrats are not infallible, but they significantly lower the probability of losing your dividend income to suspensions and dividend cuts.