1 Dividend Stock I’m Buying for Superior Passive Income in 2024

Are you interested in buying dividend stocks for passive income in 2024? Here’s one stock I’m buying!

| More on:
Various Canadian dollars in gray pants pocket

Image source: Getty Images

Investing in dividend stocks is one of my favourite strategies. That’s because, through those kinds of assets, investors can generate a steady source of passive income. In my opinion, it’s the passive income source with the lowest barrier to entry. In addition, it truly feels passive, whereas other methods of passive-income generation aren’t truly passive (i.e., rental properties), unless you hire someone to manage things for you, and that’ll eat away at your profits.

When looking for dividend stocks to hold in my portfolio, I tend to focus on Dividend Aristocrats. In Canada, these are stocks that have increased dividend yields for at least five consecutive years. What that tells me, when a stock is listed as a Dividend Aristocrat, is that its management team has great capital-allocation habits.

Another way of determining whether a company has great capital-allocation habits is by checking to see how successful it can pay its shareholders a dividend. For example, all things being equal, I would likely choose to invest in a dividend stock that has been paying its shareholders every year for the past 25 years over one that has only been paying shareholders for two years.

Finally, investors should look to buy shares of dividend stocks that have a dividend-growth rate of more than 2%. This is important because if a dividend stock isn’t capable of at least matching the long-term inflation rate, then you’ll be losing buying power over time.

What dividend stock am I buying?

For superior passive income, I’m buying shares of Fortis (TSX:FTS). This is a stock that I like very much. It’s a leader within the North American utility industry. In fact, Fortis serves more than three million customers across Canada, the United States, and the Caribbean. Fortis’s services include providing regulated gas and electric utilities.

A bona fide Canadian Dividend Aristocrat, Fortis has increased its dividend distribution in each of the past 50 years. To put that into perspective, consider how many negative events have happened in the stock market over that period. For example, the COVID-19 pandemic and the Great Recession come to mind. Through all of those events, Fortis has managed to allocate capital in a way that allowed them to continue raising dividends.

What makes Fortis’s dividend-growth streak even more impressive is that the next longest dividend-growth streak (in Canada) is nearly two decades shorter.

Fortis has already announced its plans to continue raising its dividend at a rate of 4-6% over the next four years. That could help investors stay ahead of inflation for years to come.

Foolish takeaway

If you’re interested in passive income, then my suggestion would be to take a look at dividend stocks. In particular, dividend stocks with the ability to raise distributions over time have a long history of consistent dividend payments and a high dividend-growth rate should be focused on. A company like Fortis would be a great one to look into, and it is certainly a stock I’m buying for passive income.

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 Jed Lloren has positions in Fortis. The Motley Fool recommends Fortis. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Retirement
Dividend Stocks

Got $5,000? Buy and Hold These 3 Value Stocks for Years

Given their healthy growth prospects and attractive valuations, these three stocks offer attractive buying opportunities.

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

Should You Take CPP at 65 or 70? Here’s What Research Says

If you take CPP at age 70, you may supplement your income with dividend stocks like Brookfield Asset Management (TSX:BAM)…

Read more »

Increasing yield
Dividend Stocks

Boost Your Passive Income With These 3 High-Yielding Dividend Stocks

These three high-yielding dividend stocks could boost your passive income.

Read more »

calculate and analyze stock
Dividend Stocks

TFSA Investors: 2 TSX Dividend Stocks to Buy Today

These two dividend stocks have increased their dividends annually for more than two decades.

Read more »

data analyze research
Dividend Stocks

1 Magnificent TSX Dividend Stock With 30% Upside to Buy and Hold Forever

Shares of Brookfield Renewable Partners are down 50% from all-time highs, increasing its dividend yield to more than 6%.

Read more »

question marks written reminders tickets
Dividend Stocks

Is It Too Late to Buy Costco Stock Now?

Costco stock (NASDAQ:COST) always looks like a good buy. But after a 10% drop after earnings, is it still the…

Read more »

STACKED COINS DEPICTING MONEY GROWTH
Dividend Stocks

3 Canadian Stocks With Insanely Fast-Growing Dividends

Stocks like Canadian Natural Resources are growing their dividends incredibly fast, making them a lucrative investment for income investors.

Read more »

analyze data
Dividend Stocks

Turn This CRA Benefit Into $4,050.76 in 2024

When it comes to creating funds for your future and your kids, there's a way to create massive passive income…

Read more »