Passive Income: 2 Safe Dividend Stocks to Own for the Next 10 Years

Dividend stocks such as Manulife and Fortis can help you generate a stable and recurring passive-income stream.

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Investing in safe dividend stocks that offer an attractive yield is among the cheapest ways to begin a passive-income stream. But how do you identify safe dividend stocks? Typically, you need to invest in companies that enjoy competitive moats, resulting in a stable stream of cash flows across market cycles. Moreover, the company should generate sufficient cash flows to pay shareholders a dividend, reinvest in growth projects, and lower balance sheet debt.

Its ideal if the company can increase dividends each year, enhancing the yield at cost over time. In addition to a regular payout, dividend-growth stocks should also deliver capital gains to long-term shareholders.

Here are two such safe dividend stocks passive-income investors can own for the next 10 years.

Manulife Financial stock

A company operating in the insurance and asset management sector, Manulife Financial (TSX:MFC) offers shareholders a tasty dividend yield of 4.8%. The TSX giant pays shareholders a quarterly dividend of $0.4 per share, and the payouts have almost quadrupled in the last 20 years.

Despite an uncertain macro environment, Manulife has grown its earnings by 17% year over year in the fourth quarter (Q4), driven by lower operating expenses and share buybacks. Its core return on equity (ROE) increased to almost 16%, which is in line with the company’s forecast, while adjusted book value per share rose by 9%.

It ended 2023 with a LICAT (Life Insurance Capital Adequacy Ratio) ratio of 137%. This ratio is used to assess if a life insurer can maintain adequate capital or margin to support risks specific to the life insurance business, and a ratio over 100% is favourable.

Manulife’s insurance business is a key driver of top-line growth as the segment experienced strong demand in Asia. Moreover, large and midsized group insurance sales in Canada ticked higher in Q4 in addition to robust demand from affluent customers in the U.S.

Priced at less than nine times forward earnings, MFC stock is really cheap, given earnings growth is forecast at 11.7% annually in the next five years.

Fortis stock

A Canadian utility giant, Fortis (TSX:FTS) pays shareholders an annual dividend of $2.36 per share, indicating a yield of 4.4%. In fact, Fortis raised dividends by 4.4% in Q4, marking 50 consecutive years of increases in dividends.

In 2023, Fortis invested $4.4 billion of capital in its energy systems, which should drive future cash flow growth. It also sold a non-regulated natural gas storage facility, providing it with resources to shore up the balance sheet and invest in capital expenditures.

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Fortis owns and operates a portfolio of electric and natural gas transmission and distribution systems across North America. Part of the utilities sector, the majority of the company’s cash flows are regulated.

While Fortis has limited control over energy commodity costs and headwinds such as higher interest rates, both of which are passed through to its customers. Moreover, it continues to manage operating costs via efficiencies and process improvements.

Priced at 17.7 times forward earnings, Fortis stock trades at a discount of 8% to consensus price target estimates. After adjusting for dividends, total returns may be closer to 13%.

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 Fortis. The Motley Fool recommends Fortis. The Motley Fool has a disclosure policy.

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