It’s impossible to predict how the market will behave in the next three or four years, let alone three or four decades. The economy and, by extension, the market are changing too rapidly to make broad-spectrum projections. But even with an uncertain market, you can develop a reliable passive-income stream that may remain viable for decades.
The easiest way to do it is by investing in blue-chip stocks that offer and frequently raise their payouts. Dividend growth is important as well because it ensures that your passive income stream is able to keep pace with inflation.
There are many dividend payers that have proven their mettle in this regard and sustained, even grown, their payouts for multiple decades. Their business model and presence in their respective industries indicate a high probability that they will maintain this streak for decades to come.
Fortis (TSX:FTS) is counted among the safest dividend stocks, not just in Canada but in North America as a whole. It’s the second-oldest Dividend Aristocrat in Canada and is ready to join the ranks of Dividend Kings — i.e., companies that have raised their payouts for 50 consecutive years.
This kind of dividend history is enough endorsement for its future dividends, but Fortis’s dividend is also safe and sustainable because of its business model.
As a utility company that offers both natural gas and electricity to millions of customers in different markets, it has both the reach and geographical diversity needed for long-term operational and financial sustainability. This endorses its dividend’s sustainability in the long term.
The payout ratio for the dividends has remained quite healthy as well in the past, and the company has a good history with debt management, so there might be no dangerous surprises for investors down the road.
Fortis also offers modest but consistent capital growth potential, which beefs up the overall returns.
There is a healthy collection of dividend payers in the energy sector, but one name that stands out among the energy stocks (for multiple reasons) is Enbridge (TSX:ENB). It’s one of the largest midstream companies in North America and transports a significant segment of the total natural gas and oil produced in the continent.
The midstream business model makes its revenue streams and, by extension, its dividends safer compared to upstream and downstream energy businesses. But Enbridge’s overall business model, which also includes a sizable gas utility business and renewable energy services, enhances its financial stability and dividend sustainability.
It also offers a generous dividend yield, which has become even more attractive now that the stock is trading at a 20% discount from its 2022 peak. The company has been raising its payouts for 28 consecutive years, which strengthens its position as a good long-term dividend pick.
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The two stocks have a stellar dividend history, healthy financials, and business models likely to remain relevant in the coming decades. This makes them ideal picks for developing a passive-income stream that may remain intact and even steadily grow over the years.