Income Investors: 2 Safe Dividend Stocks to Own for Passive Income for Years

Long-term passive-income stocks should ideally offer enough dividend growth to counteract inflation while preserving or growing your capital.

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Safety is one of the most important “features” investors might look for when they are choosing dividend stocks to start a passive income. However, different investors may interpret it differently based on their own risk tolerances and preferences. They may also have their own measures of how much growth or yield they are willing to sacrifice for safety.

However, there are quite a few stocks on the TSX that balance growth, yield, and dividend sustainability well enough to be considered healthy picks by almost all investors. Two such stocks should be on your radar if you are planning on building a long-term passive income, preferably from your Tax-Free Savings Account (TFSA).

An asset management company

Brookfield Asset Management (TSX:BAM) is one of the largest asset management companies in Canada, with a wide range of businesses and an impressive global reach.

The public entity has splintered, as many divisions have been spun out as individual publicly traded entities. Brookfield Asset Management is still at the heart of this large business empire. It controls a portfolio worth about $850 billion, spanning 30 countries and five industries.

Even though the largest segment of its asset portfolio is in the Americas (roughly two-thirds), it’s still a well-diversified company and a global reach also means access to a wider range of opportunities.

As a stock, dividends are just one of the attractions of this stock right now. Even though the entity itself is relatively new, the business is old and has a solid track record when it comes to dividends and dividend growth.

This makes even its modest 3.1% yield quite attractive. Another attraction is its undervaluation. The stock is also on a bullish streak and has risen over 38% in the last three months.

A bank

One of the most trusted industry/market segments when it comes to dividends in Canada is banks. Some Canadian bank stocks have paid dividends continuously for over a decade, making them the longest-standing dividend payers in the market.

Toronto-Dominion Bank (TSX:TD), the second-largest bank in Canada by market cap and the top bank in Canada across a number of dimensions, is one of the best investments you can make in the Canadian banking sector.

The main reason this bank stock is such a compelling pick is the combination of dividends and growth potential that it offers. It’s currently offering a juicy 4.9% yield, thanks to the slump it has been in for the last ten months.

It’s moderately discounted, trading at a price 23% lower than its 2022 peak. But even with this drop, its ten-year price growth is at 70%, which is quite decent, and the overall returns (with dividends) for the last decade are over 150%.

The dividends benefit from the characteristic safety of the Canadian banking sector. The payout ratio is quite safe below 70%, though not ideal, and considering the bank’s history, it would keep raising its payouts for years to come, ideally decades.

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Foolish takeaway

The two stocks are great picks whether you want to start a new passive-income stream or augment an existing passive-income stream, especially if you want it to last long term. Dividend growth is an important part of the puzzle, because if your payouts remain the same, your buying power will keep depleting year over year under the influence of inflation.

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 Adam Othman 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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