When it comes to investing for decades of passive income, most investors turn to large-cap dividend stocks. While those can be solid options, mid-cap stocks often offer a sweet spot. These stocks offer well-established businesses with room for further growth, thus meaning their dividends have the potential to increase at a faster rate than those of larger companies.
If you’re looking for stocks that can provide steady dividends while still growing in value, two standout mid-cap options on the TSX are Exchange Income (TSX: EIF) and AltaGas (TSX: ALA). These dividend stocks offer strong financials, resilient business models, and steady dividends, making them ideal long-term holdings for passive income investors. Let’s dive into why these two stocks deserve a spot in your portfolio.
EIF
Exchange Income isn’t your typical dividend stock. This Winnipeg-based holding company invests in essential businesses across aviation, manufacturing, and infrastructure, thus ensuring diversified revenue streams that provide a cushion during economic downturns.
Its recent earnings showcase strong financial performance. In the third quarter of 2024, EIF reported record revenue of $710 million, an increase of $22 million from the same period last year. More impressively, its adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) rose 15% to $193 million – all while net earnings climbed to $56 million, compared to $50 million a year earlier. These numbers highlight EIF’s ability to grow profits consistently while still paying dividends.
One of the reasons Exchange Income is such an attractive long-term passive income stock is its monthly dividend payments. The dividend stock currently offers a dividend yield of around 4.9%, and its dividend payout has been stable and growing for years. In fact, the company has never cut its dividend, even during economic slowdowns, making it a reliable choice for income-seeking investors.
Looking ahead, EIF continues to expand through acquisitions. Recently, it secured a contract to provide integrated air ambulance services for Newfoundland and Labrador – a move that further solidifies its role in essential services. These types of contracts ensure long-term, stable cash flow, which helps support future dividend growth.
ALA
AltaGas is another mid-cap dividend stock with strong income potential. It operates in the energy infrastructure and utilities sector, benefiting from both regulated cash flows and growth opportunities in natural gas and clean energy.
Despite volatility in the energy sector, AltaGas remained a resilient business. In its third-quarter 2024 earnings report, the dividend stock posted a 9% year-over-year increase in liquefied petroleum gas (LPG) exports, reaching a record 128,272 barrels per day. Meanwhile, its normalized EBITDA rose to $294 million, compared to $252 million a year earlier. Normalized earnings per share (EPS) also increased, coming in at $0.14 compared to $0.08 last year.
With its focus on stable cash flows from regulated utilities and growing midstream operations, AltaGas has been able to maintain a strong dividend policy. The dividend stock currently offers a dividend yield of around 3.6%, and it has a long track record of steady payments. Its payout ratio of 70.6% suggests sustainability, thus meaning investors can count on continued passive income from this stock.
A key driver of AltaGas’s growth is its Asian export strategy. The dividend stock has been ramping up exports of liquefied petroleum gases (LPGs) to Asia, which provides higher-margin revenue streams. This growth should support future dividend increases, making AltaGas an even more attractive option for passive income investors.
Bottom line
For investors looking to build decades of passive income, Exchange Income and AltaGas offer a rare combination of strong dividends, growth potential, and business resilience.
These mid-cap stocks strike the perfect balance between stability and opportunity. The dividend stocks aren’t as risky as small caps, but they also have more room for growth than large-cap blue chips. This makes them ideal long-term holdings for investors who want steady cash flow and the potential for rising dividends over time. If you’re serious about passive income for the long haul, these two mid-cap gems deserve a spot in your portfolio.
