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

Undervalued dividend stocks such as Sun Life and TD Bank should be part of your shopping list in 2024.

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Dividend investing is a popular strategy among investors for several reasons. First, it allows you to create a passive-income stream at a low cost. Second, if companies increase their dividends each year, your effective yield widens significantly over time. Third, in addition to capital gains, investors are also positioned to benefit from long-term capital gains.

However, investing in dividend stocks is not straightforward. Investors need to identify a portfolio of companies that have a sustainable payout ratio with the ability to grow cash flows across market cycles.

Here are three such safe dividend stocks you can own for the next 10 years.

Brookfield Asset Management stock

With more than US$850 billion in assets under management, Brookfield Asset Management (TSX:BAM) is a blue-chip stock with massive upside potential. The Canadian company expects institutional investors to increase their allocation in alternatives to US$23.2 trillion in 2026, up from US$4 billion in 2010.

Moreover, the allocation of institutional investors towards alternative asset classes might surpass 60% by the end of this decade, up from just 5% in 2000. These secular trends should allow BAM to benefit from higher management fees and earnings going forward.

Despite an uncertain macro environment, BAM expects capital inflows to rise by US$150 billion in 2023. Moreover, it is optimistic of ending 2028 with US$1 trillion in fee-bearing capital, up from US$440 billion today and US$129 billion in 2018.

BAM offers shareholders an annual dividend of US$1.28 per share, translating to a yield of 3.3%.

Toronto-Dominion Bank stock

The banking sector is highly cyclical, which can make investors nervous. Several bank stocks in the U.S. were forced to lower and even suspend dividends during the subprime mortgage crisis in 2008.

However, Canadian banks including Toronto-Dominion Bank (TSX:TD) could easily maintain their dividends due to a conservative lending approach. Canada’s banking sector is heavily regulated, which has enabled TD and its peers to enjoy entrenched positions in multiple markets such as retail banking, commercial banking, mortgage lending, wealth management, and investment banking.

Down 26% from all-time highs, TD Bank offers a tasty dividend yield of 5.1%. Moreover, these payouts have risen by more than 7% annually over two decades. Priced at 10 times forward earnings, TD Bank stock is not expensive and is forecast to gain over 13% in the next 12 months.

Sun Life Financial stock

The final TSX dividend stock on the list is Sun Life Financial (TSX:SLF), which currently yields 4.6%. Sun Life ended the third quarter (Q3) with $1.34 trillion in assets under management (AUM) and $930 in earnings.

Its solid performance in the September quarter was driven by its wealth management business, higher fee-related earnings, and growth in Asia’s individual protection business. While AUM grew by 6%, its earnings rose by 15% year over year in Q3.

Sun Life Asia had a bumper quarter as individual insurance sales surged by 60%. In Hong Kong, sales grew by 300% year over year and 50% sequentially. This was offset by weak earnings growth in the U.S. business.

Priced at 10 times forward earnings, SLF stock trades at a discount of 10% to consensus price target estimates.

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 no position in any of the stocks mentioned. The Motley Fool recommends Brookfield Asset Management. The Motley Fool has a disclosure policy.

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