Want Decades of Passive Income? 4 Stocks to Buy Now and Hold Forever

Passive income doesn’t have to be tricky or complicated, especially with these top dividend stocks that weather any storm.

Amy Legate-Wolfe

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote: “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published December 19, 2024 5:00 pm EST

Creating decades of passive income through investing is a journey of patience, strategy, and a sprinkle of excitement. The secret to success lies in the magic of dividends. Dividends are those delightful paycheques sent your way simply for holding shares in a company.

When reinvested, these create a snowball effect, compounding your returns over time. But not just any stock will do. Look for companies with a history of steady dividend payments, solid earnings growth, and a future that’s as promising as a summer day at the beach. Let’s dive into four such stocks on the TSX that you can confidently buy, hold, and watch grow for years to come.

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1. Exchange Income

Exchange Income (TSX:EIF) might not grab headlines daily, but its results speak volumes. This company specializes in acquiring and managing niche businesses in aviation and manufacturing. These two sectors might sound cyclical but have proven remarkably resilient under EIF’s management. Since its founding in 2004, EIF has consistently paid, and often raised, its monthly dividend, thus showcasing a commitment to shareholders.

In its most recent earnings report, EIF reported revenue growth of 12% year-over-year, driven by strong demand across its business segments. Impressively, the passive income stock announced a dividend hike of 4.8%, pushing its yield higher. Looking ahead, EIF is expanding its aviation segment and exploring opportunities in renewable technologies, thus making it a compelling option for passive income seekers.

2. SmartCentres

SmartCentres REIT (TSX:SRU.UN) is a standout in the Canadian real estate scene, combining retail and mixed-use properties to create a diversified income stream. While it’s primarily known for its connection to Walmart-anchored shopping centres, SmartCentres is aggressively expanding into residential and office spaces under its “SmartLiving” and “SmartCentres Place” banners.

Its latest earnings report revealed funds from operations (FFO) growth of 8% year-over-year, underscoring its strong cash flow generation. The real estate investment trust (REIT) has maintained a monthly dividend yield of over 7%. With a robust development pipeline and plans to add thousands of residential units in the coming years, SmartCentres is positioning itself as a long-term play for income investors.

3. InterRent

Another gem in the real estate space, InterRent REIT (TSX:IIP.UN) focuses on acquiring and managing multi-residential properties across Canada. Unlike some REITs that aim for sheer scale, InterRent takes a quality-over-quantity approach, emphasizing high-demand urban markets where rental growth potential is significant.

In its most recent financial results, InterRent posted revenue growth of 10%, driven by higher rental income and property acquisitions. While its dividend yield of around 2.5% may seem modest, its consistent increases and capital appreciation potential make it an attractive choice. The REIT’s strategy of upgrading older properties into modern spaces ensures it stays competitive in a tight rental market.

4. North West

The North West Company (TSX:NWC) may sound like a history lesson, but its business model is anything but old-fashioned. As a retailer serving remote and underserved markets in Canada, Alaska, and the Caribbean, North West has carved out a niche with little competition. This unique focus provides stable revenues and a loyal customer base, even in challenging economic times.

Recent earnings revealed steady revenue growth and an increase in operating income, highlighting the company’s ability to navigate inflationary pressures. With a dividend yield of approximately 4.5% and a payout ratio comfortably below 70%, North West provides reliable income with room for growth. Its ongoing investments in supply chain optimization and digital initiatives position it well for the future, making it a durable choice for your portfolio.

Bottom line

Investing in these passive income stocks is not just about the dividends. It’s about potential to weather economic storms and thrive in diverse conditions. By holding them long term, you give your investments the chance to grow while reaping the rewards of consistent payouts.

With discipline, you can build a portfolio that funds your dreams, whether it’s early retirement, a round-the-world trip, or simply more time for hobbies and family. By focusing on quality stocks like EIF, SmartCentres, InterRent, and North West Company, you’re setting yourself up for financial freedom that lasts not just years but decades.