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

Here’s why blue-chip dividend stocks such as TD and CNR should be on top of your shopping list in 2024.

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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.

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.

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 no position in any of the stocks mentioned. The Motley Fool recommends Canadian National Railway and Canadian Natural Resources. The Motley Fool has a disclosure policy.

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