2 Dividend Stocks I’d Buy and Hold Forever for Huge Passive Income

If you’re looking for passive income that lasts a lifetime, look to sectors that will be around for a lifetime! That includes these dividend stocks.

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When it comes to creating passive income, there is an important point that a lot of investors may forget. While dividends can certainly be a more immediate form of passive income for investors, overall returns are just as important — if not more so.

That’s why today, we’re going to look at two dividend stocks that provide investors with many reasons to buy and hold forever. They’ll provide you with huge passive income for the rest of your life, not just from dividends but also through returns.

To find them, investors will need to consider not just the company itself but also its outlook. And that will come down to both the company’s performance as well as the overall industry. So, let’s get into it.

Software

If you’re looking for an essential area to invest in, tech stocks should certainly be considered. Yet, I’m not going to sit here and recommend that you invest in the initial public offerings (IPO) of unproven companies. Nor am I going to ask you to invest in companies that will likely fluctuate over time.

Instead, I’m going to recommend investing in a proven company that remains in a stable and growing area. That comes down to software. Software is involved in many parts of our lives. For example, it’s how I’m writing this article. It’s how you connect your phone to your car. It’s how you take the subway! It’s everywhere, and it’s essential. This is why Constellation Software (TSX:CSU) is such a strong stock option.

CSU stock came around during the 1990s, and in that time, it has proven time and again that it can become one of the best and biggest companies on the TSX today. This comes from a strong management team that has been able to identify essential software companies that offer value. CSU management buys them up and puts them back out under the Constellation name.

Now, it sounds simple, and that’s what investors should like about it! The idea is a simple one, but the execution is far more difficult. This is why Constellation stock has proven to be such a strong investment. With growth of 206% in the last five years alone, as well as a 0.15% dividend yield (that comes to $5.44 per share annually), it remains a strong investment, especially for long-term holders.

Insurance

There are very few areas that provide something essential, yet one of these areas includes insurance. While some insurance Canadians lean towards as an option rather than a “must-have” other insurance becomes more and more essential as time goes on. And that’s property insurance and casualty insurance.

There continues to be strong performance for both property and casualty insurance, stemming from disciplined underwriting practices. Companies can assess risk and set premiums at levels that cover their losses, providing stellar risk management for investors. This provides these companies with strong financial fundamentals and even leaves them open to invest elsewhere for more profits.

A case and point is Fairfax Financial Holdings (TSX:FFH). The diversified insurance and reinsurance company holds operations worldwide, offering its property and casualty services to global operations. The company focuses on long-term growth as well, holding a stellar investment portfolio that focuses on value investing. This includes equities, fixed-income securities, and alternative investments.

Combined, these two areas have created an incredibly strong performance for Fairfax stock and its investors, all under the guidance of Chief Executive Officer Prem Watsa. And that doesn’t look likely to change. Again, as we’ll always need insurance for our properties, and we want our loved ones looked after if something happens to us, Fairfax stock looks like it has a solid future. So, while a 1.35% dividend yield doesn’t look like much, consider that the stock has surged 142% over just five years before you judge too quickly.

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 Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Fairfax Financial. The Motley Fool recommends Constellation Software. The Motley Fool has a disclosure policy.

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