Investing in dividend stocks allows you to create a passive-income stream at a low cost. However, in recent years, several TSX stocks, such as Algonquin Power and NorthWest Healthcare, were forced to lower their dividends due to rising interest rates and a challenging macro environment.
So, it’s essential to look beyond a company’s dividend yield and analyze whether these payouts are sustainable across market cycles. Ideally, you should invest in TSX stocks that grow their cash flows and dividend payouts over time, which enhances the yield at cost.
Here are two such ultra-safe TSX dividend stocks I’d buy right now.
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Is this blue-chip stock a good buy?
Canadian Pacific Kansas City (TSX: CP) owns and operates a transcontinental freight railway in Canada, the United States, and Mexico. It transports a wide range of goods, including grain, coal, potash, fertilizers, forest products, energy, chemicals, plastics, metals, minerals, consumer products, and many more. It also provides rail and intermodal transportation services over a network of approximately 20,000 miles serving business centers.
In the second quarter (Q2) of 2025, CPKC increased revenue by 3% year over year to $3.7 billion, and volume rose by 7%. Moreover, adjusted earnings per share expanded by 7% to $1.12 as its operating ratio improved by 110 basis points to 60.7%.
CEO Keith Creel addressed the proposed UP-NS merger extensively, positioning CPKC as uniquely situated to benefit from potential industry consolidation. The company expects to be an active participant in the regulatory process, advocating for concessions that could provide enhanced access to markets like Houston.
Management reaffirmed its full-year guidance, targeting an operating ratio of under 60% and mid-single-digit volume growth. It expects free cash flow to improve, driven by lower capital intensity and a focus on growth investments.
The railroad giant has increased its annual dividend per share from $0.37 in 2016 to $0.76 in 2024. Analysts forecast dividends to increase to $1.23 per share in 2028. Notably, its free cash flow is expected to expand from $2.44 billion in 2024 to $5.53 billion in 2029.
The bull case for this TSX dividend stock
Valued at a market cap of $288 billion, Royal Bank of Canada (TSX: RY) is a banking giant. In fiscal Q3 of 2025 (ended in July), RBC delivered a return on equity of 17.7%, exceeding its 16% target.
The bank reported record capital markets revenue of $3.8 billion and maintained its industry-leading 35% efficiency ratio in personal and commercial banking, showcasing the power of its diversified business model.
RBC recently completed the acquisition of HSBC Canada, which delivered $740 million in cost synergies. The successful integration of HSBC’s commercial banking capabilities, particularly in supply chain and treasury management, is driving meaningful cross-sell opportunities with $300 million in revenue synergies targeted.
Credit quality stabilized as consumer unsecured lending improved while loan-loss provisions moderated after elevated Q2 builds. Management maintains a conservative approach while expressing confidence that geopolitical headwinds are manageable given Canada’s resilient economy and RBC’s affluent customer base.
With diversified revenue streams, premium market positioning, and multiple growth catalysts across personal banking, wealth management, and capital markets, RBC appears well-positioned to sustain differentiated returns while maintaining its conservative risk profile.
The banking behemoth has increased its annual dividend per share from $3.24 in fiscal 2016 (ended in October) to $5.60 in fiscal 2024. Analysts forecast dividends to increase to $7.34 per share in 2028.
