Are you looking for quality stocks that have the potential to pay you passive dividend income for decades?
If so, you’ve got a worthy goal. However, achieving it will be harder than it looks. The history of the markets is full of examples of companies that cut or even eliminated their dividends. To get truly substantial amounts of dividend income coming in on a regular basis, without buying and selling stock all the time, you need to pick quality dividend stocks in the first place. Otherwise you may risk having the dividends cut or eliminated. With that in mind, here are two Canadian dividend stocks that have the potential to pay you for decades.
Suncor Energy
Suncor Energy (TSX:SU) is a Canadian energy stock that has gotten beaten down because of a major rout in oil prices. Earlier this year, oil prices went above $80, but the WTI Crude price slipped to $65 more recently, and it hasn’t recovered much since then. SU stock fell along with the price of the commodity it sells.
Oil prices will always go up and down, but there are reasons to think that they will stay well above Suncor’s breakeven point ($45) for the foreseeable future:
- The alternatives to oil that everybody wants to support (renewables) are not able to fully replace oil.
- The main proven alternative that does work (nuclear) is politically unpopular in some quarters. Also, nuclear power plants take 5 to 10 years to build. The 2022 oil price shock did inspire some countries to pursue nuclear, but any country that became newly positive on nuclear that year will have reactors under construction for many more years to come.
For the two reasons above, oil prices will likely remain healthy for the next five years at least, possibly for several decades. Suncor Energy, as one of Canada’s premier integrated oil companies, benefits from this fact. It owns a network of gas stations nation-wide, sells oil on the open markets, and also refines oil. It has a lot of ways to make money in a healthy oil market.
TD Bank
The Toronto-Dominion Bank (TSX:TD) is a currently out of favour. The company is currently unpopular because it is being investigated for money laundering in the United States. There is no doubt that TD will pay out billions of dollars in fines. However, the company expects that the U.S. DoJ’s investigation into it will be wrapped up by the end of this year. It is reportedly preparing to enter a guilty plea, after which financial penalties will be finalized. In the meantime, its revenue and gross profit have been rising by decent percentages in recent quarters, due to a favourable climate for financial stocks like TSX Bank stock. So, the stock appears cheap relative to estimated 2025 earnings.
TD Bank has proven itself a very resilient financial institution over the years. Its growth has been above average, its U.S. M&A strategy has paid off, and its capital and leverage ratios have generally been best-in-class among TD’s peer group. Overall, I’d say TD will perform well long term.
