3 TSX Dividend Stocks I’d Buy for Decades of Passive Income

Three classic Canadian dividend names, spanning banking, insurance, and groceries, still look built for long-term compounding.

Amy Legate-Wolfe

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote: “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published June 23, 4:50 pm EDT

| More on: GWOMRURY

Key Points

Royal Bank keeps delivering big profits and dividend growth, backed by a diversified financial empire across Canada and beyond.
Great-West Lifeco offers steady insurance and retirement exposure, with strong base earnings growth and a solid 3% yield.
Metro is a lower-yielding but reliable grocery and pharmacy compounder, supported by steady earnings growth and buybacks.

10 stocks we like better than Great-West Lifeco

Some stocks earn their spot. Not for a month or one trade, but for years or maybe even decades. These are the companies that keep showing up in Canadian portfolios because their businesses make sense, dividends keep coming, and customers rarely disappear.

That’s the kind of stock I’d want in a long-term dividend portfolio. And right now, three Canadian names stand out, namely Royal Bank of Canada (TSX:RY), Great-West Lifeco (TSX:GWO), and Metro (TSX:MRU). Together, these give investors exposure to banking, insurance, wealth management, groceries, and pharmacies, providing a strong foundation.

dividend growth for passive income — Source: Getty Images

RY

RBC stock is the obvious heavyweight. Canada’s largest bank has spent generations building scale across personal banking, commercial banking, wealth management, capital markets, and insurance. It has the kind of business that touches nearly every corner of the Canadian economy.

The latest quarter showed why investors keep coming back. RBC stock reported second-quarter net income of $5.5 billion, up 25% from last year. Diluted earnings per share (EPS) climbed 27% to $3.85. The bank also raised its quarterly dividend to $1.76 per share, up 7%. That’s the kind of increase long-term investors like to see.

RBC stock’s strength comes from size and diversity. When one part of the business slows, another can help carry the load. Wealth management can benefit from stronger markets. Personal banking can keep bringing in deposits and loans. Capital markets can pick up when deal activity improves. The bank won’t avoid every recession or credit cycle, but it has the balance sheet and brand to keep fighting through them.

In short, RBC stock survived much worse than today’s uncertainty. For a buy-and-hold dividend investor, it remains one of Canada’s core stocks offering a stellar dividend yield at 2.5% and trading at 18.4 times earnings.

GWO

Great-West Lifeco brings a different kind of financial exposure. Instead of banking, it focuses on insurance, retirement, wealth, and asset management through brands such as Canada Life and Empower. That gives investors access to long-term savings and retirement trends, which should only grow as populations age.

Its first-quarter results looked strong. Great-West reported base earnings of $1.2 billion, up 20% from last year. Base EPS rose 23% to $1.37. The company also produced a base return on equity of 19.1%, hitting its medium-term goal.

The dividend adds to the case. Great-West declared a quarterly dividend of $0.67 per share, coming to an annual dividend of $2.56 and a yield of about 3%. Investors also get a business that can benefit from wealth growth, retirement demand, insurance premiums, and disciplined capital returns. Great-West has built a broad platform across Canada, the United States, and Europe. That gives it more than one path to long-term growth, all while trading at a reasonable 19 times earnings at writing.

MRU

Then there’s Metro, the steady grocery and pharmacy stock. Metro owns grocery banners and pharmacies that serve everyday needs. Metro’s latest quarter showed steady execution. Adjusted net earnings rose 4.4% to $236.5 million, while adjusted diluted EPS increased 8.8% to $1.11. The board also declared a quarterly dividend of $0.41 per share, coming to $1.63 annually and yielding 1.8% at writing.

Metro doesn’t offer the biggest yield, but it has something income investors often underestimate: reliability. Grocery margins can look thin, and food inflation can frustrate shoppers, but Metro has strong banners, pharmacy exposure, and a long record of returning cash to shareholders. It can also buy back shares, which helps earnings per share over time. All while trading at just 19.6 times earnings at the time of writing.

Bottom line

RBC stock, Great-West Lifeco, and Metro won’t make a portfolio exciting every day. Yet the goal with forever stocks isn’t constant excitement. It’s ownership of companies that keep earning, paying, and adapting. And even now, $7,000 in each stock can bring in ample income for compounding.