Investing in dividend stocks can be quite tricky as these payouts are not guaranteed. In fact, in the last five years companies such as Suncor Energy, Algonquin Power & Utilities, and Northwest Healthcare were forced to lower dividend payouts when their financials deteriorated due to macro headwinds.
So, it’s essential to identify a portfolio of blue-chip stocks that enjoy a wide economic moat, allowing them to maintain and grow cash flows across market cycles. Here are three such safe dividend stocks to own for the next 10 years.
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Manulife stock
Valued at $63 billion by market cap, Manulife (TSX: MFC) is an insurance and financial services giant. Despite a sluggish macro environment, Manulife reported core earnings of $1.8 billion, up 16% year over year, showcasing the resiliency of its diversified businesses.
Manulife pays shareholders an annual dividend of $1.60 per share, indicating a forward yield of 4.5%. These payouts have more than tripled in the last decade, enhancing the effective yield significantly.
Bay Street forecasts Manulife to end 2024 with adjusted earnings per share of $3.72 per share. It suggests the TSX dividend stock trades at less than 10 times forward earnings which is quite cheap, given earnings are forecast to expand by 12% annually in the next five years.
Broadcom stock
One of the safest dividend growth stocks in the world is Broadcom (NASDAQ: AVGO), which offers a yield of just 1.5%. However, in the past decade, AVGO stock has returned an astonishing 2,300% to shareholders after adjusting for dividends. Broadcom has raised its dividends by more than 25% annually since 2014, making it one of the hottest growth stocks to own right now.
Valued at US$650 billion by market cap, Broadcom is a diversified technology giant part of verticals such as software solutions, semiconductors, and networking.
Between fiscal 2016 and 2023, Broadcom increased sales by 15% annually. Similar to other asset-light companies, Broadcom’s high operating leverage has allowed the company to grow earnings by 21% annually in this period.
Priced at 30 times forward earnings, Broadcom stock might seem expensive. However, the tech giant is on track to expand earnings by 15% annually in the next five years.
Canadian Pacific Kansas City stock
The final dividend stock on my list is Canadian Pacific Kansas City (TSX: CP) that pays shareholders an annual dividend of $0.76 per share, indicating a yield of just 0.7%. While the payout might not seem attractive, investors should note that the railroad giant has raised dividends by 10.2% annually in the last 19 years.
Due to elevated inflation levels, CPKC reported an operating ratio of 67.4% in the first quarter, up from 63.4% in the last year. This ratio indicates the efficiency of a company’s management as it compares total operating expenses to net sales, and a lower ratio is favourable.
In the last 20 years, CP stock has returned close to 2,000% to shareholders, outpacing the TSX index by a wide margin. Despite its outsized gains, Canadian Pacific Kansas City trades at 26 times forward earnings, which is reasonable as it is on track to expand earnings per share from $3.84 in 2023 to $4.38 in 2024 and $5.2 in 2025.
