2 “SWAN” Dividend Stocks for Passive Income (AKA “Sleep Well at Night” Stocks)

These SWAN dividend stocks are good buys today for passive income. They would be even better buys on further selloffs, though.

| More on:
money while you sleep

Image source: Getty Images

Are you looking for “SWAN,” or “sleep well at night,” dividend stocks? Here are a couple of prime examples of SWAN dividend stocks you can depend on and buy and hold — ideally forever. They should allow you to generate passive income peacefully in your sleep.

RBC stock

Royal Bank of Canada (TSX:RY) is one of the most reliable Canadian bank stocks you can own for the long haul. It just reported its quarterly earnings results last Thursday. In the first half of the fiscal year, the bank increased its adjusted revenue by 11%, but its adjusted non-interest expense rose 16%.

Because Canada and the United States expect to experience a recession this year, generally, Canadian banks — RBC included — are having higher provision for credit losses (PCL) this fiscal year. Specifically, its fiscal year-to-date PCL is $1,132 million compared to a release of $237 million of the reserve in the first half of fiscal 2022. This weighed on RBC’s adjusted earnings per share, which declined 2% to $5.76. Its PCL on impaired loans of average net loans remained low at 0.19%, despite being up 111% from 0.09% a year ago.

Notably, the bank’s payout ratio remained healthy at about 46%. And it’s boosted investor confidence by raising its quarterly dividend by 2.9% to $1.35 per share, equating to an annualized payout of $5.40. At $123.08 per share at writing, the blue-chip stock yields close to 4.4% and trades at a discount of just over 10%.

Brookfield Infrastructure

Brookfield Infrastructure Partners (TSX:BIP.UN) is another SWAN stock you can depend on for growing passive income. Since it was spun off from its parent company, the utility stock has increased its cash distribution every year for about 15 consecutive years. For reference, its five-year cash-distribution growth rate is 6.6%.

Only 44% of its funds from operations (FFO) is generated in North America. So, it provides diversification geographically and across infrastructure type. Management sees significant capital deployment opportunities globally across infrastructure assets in utilities, transport, midstream, and data.

It forecasts FFO per unit at a compound annual growth rate (CAGR) of north of 10% that can drive cash distribution growth of 5-9% annually and total returns of 12-15%. A part of its growth plan is to redeploy capital from the sale of mature assets. The company was able to invest about US$2.4 billion in new acquisitions over the last 12 months.

At $49.38 per unit at writing, analysts believe Brookfield Infrastructure trades at a discount of just over 15%. As well, it offers a decent yield of 4.2%.

Unless you hold the BIP.UN shares in registered accounts, the tax reporting of the cash distribution may be a little complicated. That said, investors can also own the Brookfield Infrastructure Corp. shares, which are economically the same as BIP.UN units but pay out dividends and trade at a steep premium of close to 30% (and therefore yield north of 3.2%) at writing.

Investor takeaway

Even for SWAN stocks that are some of the best stocks to invest in, investors should still watch out for the valuation. That is, aim to buy shares at a discount, because there are always some events, including macro headwinds like rising interest rates or recessions, that can put stocks on sale.

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 Kay Ng has positions in Brookfield Infrastructure Corp. and Brookfield Infrastructure Partners. The Motley Fool recommends Brookfield Infrastructure Partners. The Motley Fool has a disclosure policy.

More on Dividend Stocks

money cash dividends
Dividend Stocks

2 Dividend Stocks for Passive Income

Both of these dividend stocks are good sources of long-term passive income. They also currently trade at good valuations.

Read more »

Close up shot of senior couple holding hand. Loving couple sitting together and holding hands. Focus on hands.
Dividend Stocks

These 3 Canadian Dividend Stocks Are a Pensioner’s Best Friend

Are you a pensioner looking for dividend stocks to add to your portfolio? Here are three top picks!

Read more »

Dividend Stocks

3 No-Brainer Stocks to Buy With $200 Right Now

Are you looking to invest $200 in stocks right now? Here are three no-brainer stocks to invest your money in…

Read more »

Dividend Stocks

TFSA Investors: How to Earn $350/Month in Passive Income

Add 7.78%-yielding Enbridge stock and 4.5%-yielding Fortis to your TFSA for a generous passive income stream for the long term.

Read more »

A golden egg in a nest
Dividend Stocks

Passive Income: How to Earn $200 Per Month in Your TFSA Portfolio

Who doesn't want a little extra passive income? Here's one way you could earn $200/month of diversified, tax-free income!

Read more »

data analytics, chart and graph icons with female hands typing on laptop in background
Dividend Stocks

2 Dividend Stocks That Are Insanely Oversold Right Now

BCE (TSX:BCE) and another battered dividend stock are ripe for buying for brave bargain hunters.

Read more »

Growing plant shoots on coins
Dividend Stocks

3 Dividend Stocks to Buy While They Are on Sale

These top TSX dividend stocks now offer great yields.

Read more »

Canadian Dollars
Dividend Stocks

Buy 734 Shares of This Top Dividend Stock for $9,574 a Year in Passive Income

Are you looking to earn regular income? Now is an opportune time to buy Dividend Aristocrats at discounts and accelerate…

Read more »