Investing in blue-chip dividend stocks is a proven strategy that helps you begin a passive-income stream for life. Typically, blue-chip stocks have market-leading positions, a competitive moat, and predictable cash flows that allow them to maintain dividend payouts across market cycles. Here are three such safe dividend stocks to own for the next 10 years.
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Toronto-Dominion Bank stock
One of the largest banks in North America, Toronto-Dominion Bank (TSX: TD) pays shareholders an annual dividend of $4.08 per share, indicating a forward yield of 5.4%. Despite a challenging and uncertain macro environment, TD reported earnings of $3.8 billion in the fiscal second quarter (Q2) of 2024 (ended in April), up 2% year over year.
TD’s businesses, such as Canadian personal and commercial banking, wealth management, and wholesale banking, delivered steady earnings growth, which was offset by a weak performance in the U.S. retail banking business.
TD Bank has returned more than 600% to shareholders in the last two decades after adjusting for dividends, easily outpacing the TSX index. Even after posting stellar returns, TD Bank stock trades 30% below all-time highs, allowing you to buy a quality company at a discount.
Similar to other big Canadian banks, TD Bank has a conservative approach to lending and an entrenched position in the domestic market, enabling it to maintain dividends even during the financial crash of 2008-09. In the last two decades, TD Bank has raised dividends by more than 7% annually, enhancing the effective yield over time. Priced at 9.2 times forward earnings, TD Bank stock is quite cheap and trades at a discount of 10% to consensus price target estimates.
Canadian National Railway stock
Canadian National Railway (TSX: CNR) stock has returned 1,470% to shareholders in dividend-adjusted gains since July 2004. Valued at $102 billion by market cap, the railroad giant pays an annual dividend of $3.38 per share, indicating a yield of 2.1%.
Canadian National recently inked a $78 million deal to acquire Cape Breton & Central Nova Scotia Railway, which should open up opportunities on the eastern coast.
Railroads are capital-intensive and regulated to some extent, resulting in high barriers to entry. Moreover, railroads are a preferred mode of transportation for long-distance freight due to their lower costs.
CNQ’s market-leading position has allowed it to increase its dividends for the 28th consecutive year in 2024. The TSX dividend stock also trades at a 12% discount to consensus price target estimates.
Canadian Natural Resources stock
The final dividend stock on my list is Canadian Natural Resources (TSX: CNQ), an oil and gas heavyweight. While CNQ is part of a highly cyclical sector, it has raised dividends by more than 20% annually in the last 24 years. With an annual dividend of $2 per share, CNQ’s dividend yield is quite attractive at 4.1%.
With a net debt of around $10 billion, CNQ has the flexibility to return 100% of its free cash flow to shareholders this year. Moreover, with strong crude oil strip pricing, it aims to generate significant free cash flow in 2024 amid lower consumer demand.
A large and diverse base of cash-generating assets should allow CNQ to deliver steady cash flow in 2024 and beyond.
Priced at 13.3 times forward earnings, CNQ stock trades at a discount of 12% to consensus price target forecasts.
