Investing in fundamentally strong blue-chip stocks is a proven strategy to build long-term wealth. Typically, blue-chip companies enjoy multiple competitive moats and market-leading positions, allowing them to generate stable cash flows across market cycles. Moreover, they reinvest these cash flows in growth projects and distribute a portion of the earnings to shareholders via dividends.
A widening base of cash flows generally translates to higher dividend payouts over time, enhancing the effective yield in the process.
Here are three dividend-paying, blue-chip stocks you can buy right now that can help you generate a reliable passive income for retirement.
Tourmaline Oil stock
Valued at $23 billion by market cap, Tourmaline Oil (TSX: TOU) is one of the largest natural gas producers in Canada. The TSX energy stock went public in late 2010 and has since returned 216% to shareholders. However, if we adjust for dividend reinvestments, total returns are much higher at 351%.
In the last 12 months, Tourmaline reported an operating cash flow of $3.71 billion, or $10.73 per share. It spent more than $2 billion in capital expenditures and reported a free cash flow of $1.69 billion in 2023.
The TSX giant pays investors an annual dividend of $1.20 per share, indicating a yield of less than 2%. But it consistently pays shareholders a special dividend, raising its trailing 12-month yield to an attractive 10%
TOU has raised its dividends 13 times since it began the payout six years back.
Restaurants Brands International stock
Restaurants Brands International (TSX: QSR) is the parent company of fast-food chains such as Burger Kings, Popeyes, and Tim Hortons. Valued at $22 billion by market cap, the TSX stock has more than tripled investor returns since its IPO (initial public offering) in late 2014.
Despite these outsized gains, the quick-service restaurant operator offers you a forward yield of 3.2%, given its annual dividend payout of $3.14 per share.
With more than US$40 billion in system-wide sales annually, QSR aims to end 2028 with 40,000 restaurants and US$60 billion in system-wide sales. It also aims to exit 2028 with an adjusted operating income of US$3.2 billion.
Restaurant Brands expects its investment horizon should result in low double-digit shareholder returns in this period, comfortably beating the TSX index.
Bank of Nova Scotia stock
The final TSX dividend stock on my list is Bank of Nova Scotia (TSX: BNS), which offers a forward yield of 6.6%. While the banking sector is cyclical, BNS has a conservative approach to lending, which has helped it maintain the dividend payout even during the financial crisis in 2008.
Unlike other TSX banks, BNS has a sizeable exposure to emerging economies in South America, which should be a key driver of earnings growth in the upcoming decade.
Priced at 10 times forward earnings, BNS is forecast to expand its earnings by more than 6% annually in the next five years. Analysts remain bullish and expect BNS stock to gain over 6% in the next 12 months. After adjusting for its dividend yield, total returns will be closer to 13%.
