If you’re an investor looking for decades of passive income, there are two areas where you should look first: utilities and Canadian banks. So let’s skip all the drama and go straight to the top with two Canadian giants that cannot be beat.
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RY
First up, we have Royal Bank of Canada (TSX:RY), not just Canada’s largest bank, but the largest stock by market cap. In fact, it’s larger than some of the biggest banking institutions in the United States. That already shows you just how solid and stable this top stock is.
That strength was seen once again during its recent earnings. RBC stock reported record net income of $5.4 billion, up 21% year-over-year. Furthermore, it reported adjusted earnings per share (EPS) of 18%. Growth was broad, from personal banking and wealth to insurance and capital markets. Plus, its integration of HSBC Canada continues to add scale and synergies, further strengthening why RBC remains a dominant bank stock.
Yet even amidst this growth, the company remains safe. The dividend stock reported a CET1 ratio of 13.2%, with $3.1 billion returned in dividends and buybacks during the quarter. It just goes to show that there is even more room to reward shareholders, especially with a 14.7% return on equity (ROE). Now with a dividend at 3.1%, a $7,000 investment could bring in annual income of $216!
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
|---|---|---|---|---|---|---|
| RY | $199.74 | 35 | $6.16 | $216 | Quarterly | $6,990 |
FTS
Then there’s Fortis (TSX:FTS), a utility giant that has no reason to slow down. Fortis’ model brings in 99% of earnings through regulated businesses, showing that it can remain stable across any economic cycle. During the second quarter, that was evident once more, with EPS up 13% to $0.76. Plus, its new investments like Eagle Mountain Pipeline and battery storage projects all add to future growth.
In fact, there is a massive capital expenditure (capex) pipeline in that future. Fortis stock reported its $26 billion five-year plan, which should grow its regulated rate base from $39 billion in 2024 to $53 billion by 2029! That’s a compound annual growth rate (CAGR) of 6.5% – all under rate-recoverable projects supported by earnings growth and dividend guidance.
As for that dividend, this is a top stock that’s increased its dividend every single year for the last 51 years! This makes it a top dividend choice with a yield currently at about 3.6%. A $7,000 investment right now could therefore bring in $253 each and every year.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
|---|---|---|---|---|---|---|
| FTS | $67.91 | 103 | $2.46 | $253 | Quarterly | $6,995 |
Bottom line
If you’re looking for quality, it doesn’t get much better than RY and FTS. Royal Bank is a dividend compounder producing steady payouts and capital appreciation. For decades of passive income, it can help every investor sleep well at night. The same goes for Fortis, with a defensive, low-volatility utilities business built for steady, compounding growth. So while neither will explode in share price, both can be compound powerhouses in the decades to come.
