How to Invest $10,000 This Year to Create Ultra-Safe Passive Income

Investing in TSX dividend stocks such as Fortis can help shareholders earn a passive income stream for life.

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Dividend stocks offer investors a low-cost way to create a stable and recurring stream of passive income. You can start generating passive income by investing in dividend stocks that also have the potential to enhance total returns via capital gains.

Investors need to create a diversified portfolio of blue-chip dividend stocks to lower overall risk and ensure a payout across market cycles. Here are three such TSX stocks you can buy with $10,000 to create ultra-safe passive income.

Fortis stock

A Canada-based utility giant, Fortis (TSX:FTS) offers shareholders a dividend yield of almost 4%. Fortis generates, transmits, and distributes electricity to around 550,000 retail customers in Arizona, with an aggregate capacity of 3,328 megawatts. This includes 68 megawatts of solar capacity and 250 megawatts of wind capacity. Moreover, Fortis sells wholesale electricity to entities in the U.S. and distributes natural gas to over 1 million customers in Canada.

Due to its regulated cash flows, Fortis has increased dividends for 49 consecutive years, the second-highest streak for a Canadian company. It now expects to increase dividends between 4% and 6% annually through 2027.

Fortis expects to allocate $4.3 billion in capital expenditures in 2023, which should increase future cash flows and support dividend hikes. Its rate base is forecast to increase from $34.1 billion in 2023 to $46.1 billion in 2027.

Priced at 19 times forward earnings, FTS stock trades at a discount of 6% to consensus price target estimates.

Brookfield Infrastructure stock

A diversified infrastructure company, Brookfield Infrastructure (TSX:BIP.UN) owns pipelines, data centres, cellular towers, and power lines. These businesses are contractually secured or regulated, allowing BIP to pay shareholders a dividend yield of over 4.3%.

In the last 10 years, Brookfield Infrastructure has increased funds from operations, or FFO, at 11% annually. In this period, its dividends have risen by 9% annually. Despite an inflationary environment, BIP expects to increase FFO per share by 10% year over year in 2023, showcasing the resiliency of its business model.

Priced at just 12 times forward earnings, BIP stock trades at a very cheap valuation. The company estimates it will deliver annual returns of 12% to 15% to shareholders. Analysts expect shares to surge around 30% in the next 12 months.

Royal Bank of Canada stock

The final TSX dividend stock on my list is Royal Bank of Canada (TSX:RY), one of the largest banks in North America. RBC is well-diversified across geographies and client segments, allowing it to capitalize on opportunities created by changing economic conditions and market dynamics. It provides a full suite of products and services, resulting in higher customer engagement and satisfaction rates.

The Royal Bank of Canada is the ninth-largest investment bank globally and sixth-largest wealth advisory company in the U.S. in terms of assets under management.

Priced at 12 times forward earnings, RY stock offers shareholders a dividend yield of 4.2%. The Big Six bank’s strong capital position and high-quality balance sheet make it a top investment for long-term investors. Its payout ratio of below 50% is also quite sustainable, given RBC is on track to increase adjusted earnings by 6.6% annually in the next five years.

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 Aditya Raghunath has positions in Fortis. The Motley Fool recommends Brookfield Infrastructure Partners and Fortis. The Motley Fool has a disclosure policy.

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