Passive Income: 3 Safe Dividend Stocks to Own for the Next 10 Years

Blue-chip Canadian dividend stocks, such as Toronto-Dominion Bank, offer investors tasty forward yields in 2023.

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Investing in dividend stocks is a popular strategy as it is a low-cost way to generate a steady stream of passive income. However, before investing in dividend stocks, you should also understand that dividend payouts are not guaranteed. It’s essential to identify top-quality TSX stocks that enjoy wide economic moats and are equipped with healthy balance sheets.

Ideally, your portfolio of dividend stocks should have a sustainable payout ratio and a history of increasing payouts across market cycles. Here are three such safe Canadian dividend stocks that have a resilient business model, widening cash flows, and a well-covered dividend-payout ratio.

Canadian Utilities stock

An energy infrastructure company, Canadian Utilities (TSX:CU) offers investors a dividend yield of 5.3%. With $22 billion in assets, Canadian Utilities has three business segments:

  • Utilities: Electricity and natural gas transmission and distribution.
  • Energy Infrastructure: Energy storage, energy generation, clean fuels, and industrial water solutions.
  • Retail Energy: Electricity and natural gas retail sales.

Canadian Utilities has increased dividends for 51 consecutive years, the longest record among Canadian companies. It now aims to grow dividends in line with earnings, which, in turn, is linked to regulated and long-term contracted investments.

A regulated earnings base provides the foundation for dividend growth. Additionally, Canadian Utilities expects to invest $4.1 billion in regulated utility and commercially secured energy infra projects in the next two years, which should drive future cash flows higher.

Toronto-Dominion Bank stock

A large Canadian bank, Toronto-Dominion (TSX:TD), first started paying shareholders a dividend 166 years ago. Valued at a market cap of $160 billion, TD Bank offers investors an annual dividend of $3.84 per share, translating to a yield of 4.5%. Moreover, these payouts have grown by 11% annually in the last 28 years, which is exceptional for a cyclical bank stock.

Priced at 10 times forward earnings, TD stock is very cheap and is forecast to expand adjusted earnings by 6% annually in the next five years, which should also support dividend raises.

TD Bank is well-diversified and is armed with a healthy balance sheet. Its strong credit quality and ability to grow loans consistently make TD stock a top bet for long-term investors.

Brookfield Renewable Partners stock

The final TSX dividend stock on my list is Brookfield Renewable Partners (TSX:BEP.UN), which offers a yield of 4.6%. One of the largest clean energy players in the world, BEP has assets spanning categories such as solar, wind, and hydro.

Brookfield Renewable stock has already returned 371% to shareholders in the last decade and is up a whopping 1,840% since July 2003. It remains a solid investment for shareholders as the company has an expansive project backlog which will increase its capacity to 132 gigawatts, up from 32 gigawatts today.

A majority of the electricity it generates is sold via long-term power-purchase agreements with electric utilities, resulting in a steady stream of cash flows.

Due to a stable earnings base, Brookfield Renewable aims to increase annual dividends between 5% and 9% each year, making the shares attractive to the income investor.

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 Brookfield Renewable Partners. The Motley Fool recommends Brookfield Renewable Partners. The Motley Fool has a disclosure policy.

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