Investors looking for “forever” holdings in their portfolio are actually pretty limited in their choice, I’d argue. That’s because most equities – be they dividend stocks, value stocks, or higher-growth companies – have implied upside potential based on their unique underlying drivers. Few companies can maintain solid growth (or see growth acceleration) over long stretches, leaving just a few stocks worth considering as truly long-term holds.
I think narrowing down one’s watch list to three to five top stocks in any of these given baskets is a good way to track performance over time and gauge whether these specific holdings stand up to the “forever” test. In the world of top-tier dividend stocks, here are three of my top picks right now that I think investors would be remiss to ignore.
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Toronto-Dominion Bank
For investors looking for a nice mix of dividend income as well as capital appreciation upside, Toronto-Dominion Bank (TSX:TD) remains a top pick of mine worth considering.
This Canadian mega bank has seen its share price absolutely explode higher. In fact, TD stock is up nearly 100% from its 52-week low, and appears to have all the momentum in the world right now.
Some of this upside momentum has a lot to do with a steepening yield curve, which benefits banks like TD due to what’s known as net interest margins. Banks make money by borrowing short and lending longer-term. When short-term interest rates are above long-term rates, that’s not a good mix for banks like TD.
So, with the bond market stabilizing, and TD’s global growth profile remaining among the best of its peers, this is a top dividend stock I think is worth buying for more than its 3.4% yield.
SmartCentres REIT
I’ve become increasingly bullish on SmartCentres REIT (TSX:SRU.UN), and the more I dive into this real estate investment trust, the more bullish I seem to get.
A REIT focused on retail real estate, a segment of the property market that many investors have clearly shunned, this is a company that’s also unfairly gotten hit (in my view). With a world-class portfolio of properties in urban centers, anchored by blue-chip tenants with very deep pockets, SmartCentres has maintained very low occupancy rates and continued to grow its net operating income in a material way.
These underlying trends are really what matter for investors who are trying to determine whether the company’s 7.3% dividend yield is truly sustainable.
My answer to that question is yes, and I think SmartCentres’ impressive yield in combination with some meaningful capital appreciation upside could make this stock the most profitable on this list for investors willing to be patient (and buy whichever dips may come).
Fortis
Last, but certainly not least on this list of top dividend stocks for long-term investors to consider in their “forever” portfolio is Fortis (TSX:FTS).
Most readers are well aware that this is the top Canadian dividend stock I’m most bullish on right now. In fact, it might be the company I think is the best-positioned from a valuation and growth perspective as well.
That’s because Fortis’ core business model involves selling regulated utility services (electricity and natural gas) to millions of customers across North America. This is an extremely stable business with predictable cash flow growth. Fortis has relied on this cash flow growth model to raise its dividend for more than 50 years straight. From a dividend growth perspective, I’d argue there’s probably no better company on the TSX right now.
That’s to say nothing of Fortis’ growth profile, if AI turns out to be as big as everyone expects. I’m very bullish on Fortis right now.
