Passive Income: 3 Safe Dividend Stocks to Own for the Next 10 Years

Investing in quality dividend stocks such as Manulife and Broadcom is a proven strategy to earn a steady stream of dividend income.

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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.

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.  

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 Algonquin Power & Utilities. The Motley Fool recommends Canadian Pacific Kansas City and NorthWest Healthcare Properties Real Estate Investment Trust. The Motley Fool has a disclosure policy.

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