Whether you are retired, near retirement, or just tired of working, dividend stocks can help supplement or even replace your employment income. In fact, many Canadian investors have slowly and steadily built dividend-producing portfolios that far exceed their regular income.
If you are looking for a place to start, here are three stocks that provide low-risk dividend income worth holding for the long term.
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A stock with an incredible dividend-growth trajectory
Canadian Natural Resources (TSX: CNQ) is a cash machine. Even when oil prices have drastically moderated to the $60-$70 range, it still generated $3.3 billion of fund flows and $1.5 billion of profit in its recent quarter.
In the second quarter alone, it returned $1.2 billion to shareholders in the form of dividends and $400 million in the form of share buybacks.
Canadian Natural has a lean operating model that can generate positive free cash flows even if oil prices were to dip into the $40 range. It has multiple decades’ worth of inventory, so it doesn’t have to spend a lot to go and find new discoveries.
In fact, in recent years, it has been consolidating high-quality, long-life assets across Western Canada. That should only bolster its longevity.
Today, this dividend stock yields 5.4%. The company has grown its dividend by a +20% compound annual growth rate (CAGR) for 25 years. For dividends, this is a high-quality stock to hold.
A real estate stock with value and income
If you want something without commodity exposure, First Capital Real Estate Investment Trust (TSX: FCR.UN) might be of interest. It operates 21.9 million square feet of urban-focused, grocery-anchored retail space.
The company focuses on properties located in high density neighbourhoods. Its centrally located properties earn strong occupancy rates (over 97%) and have enjoyed mid-single-digit rental rate growth for years.
First Capital has been selling off non-core assets and strengthening its balance sheet. It also has substantial development and land assets that are not fairly valued in the price.
This recession-resilient dividend stock yields 4.6% right now. For a quality portfolio of assets that still trade at a discount to their private market value, there is attractive value in this stock today.
A top dividend stock for low-risk income over the long term
AltaGas (TSX: ALA) is another resilient dividend stock worth holding for the long run. AltaGas is a hybrid company. It operates a gas utility business in the northern United States. It also operates a crucial energy midstream business in Western Canada.
This stock is intriguing because you get to own a very stable (and growing) business, but at a discount to most comparable peers in their respective segments. AltaGas has widely outperformed peers with a 150% stock price gain over the past five years.
In that time, AltaGas has grown revenues by a 19% CAGR and earnings per share by a 12% CAGR. The company has completed a very successful turnaround strategy. Today, it has a highly improved balance sheet, a great mix of stable assets, and above-average growth opportunities.
This dividend stock yields 3%. It has been growing its dividend by a 6% annual rate. It anticipates holding that dividend-growth rate for the next several years. It’s a solid, low-risk dividend stock to hold if you’d rather earn money passively than work for it.
