Passive Income: Three Safe Dividend Stocks You Can Own For Decades.


dividends grow over time

Many people look to high-yielding dividend stocks for passive income. Certainly, this can seem easy and convenient. Who doesn’t want to earn an outsized dividend yield on their investment? It’s a tangible cash return!

Take total returns over high dividend yields

Unfortunately, there are two problems with this. Firstly, if you are not holding your dividend stocks in a registered account (like the Tax-Free Savings Account, or TFSA, or Registered Retirement Savings Plan, or RRSP), you are paying tax on every dividend payment. Over time, that can eat away your long-term returns.

Secondly, stocks with elevated dividends (like over 7-8%) tend to have elevated risks associated with their business. This can be due to macroeconomic concerns, balance sheet troubles (rising interest rate exposure), a weakening competitive edge, or declining sales/earnings.

Passive income for decades

Any time you are buying a stock with an outsized yield, it is crucial to make sure you are confident in its sustainability and longevity. If you want to own a stock for decades, it is better to buy a stock that grows earnings/cash flows and dividends hand in hand.

Three stocks that should safely provide decades of sustainable dividends are Granite Real Estate Investment Trust (TSX:GRT.UN), Canadian National Railway (TSX:CNR), and Brookfield Asset Management (TSX:BAM).

Granite REIT: A real estate stock for the decades

With a market cap of $5.4 billion, Granite REIT is Canada’s largest industrial REIT. It has a portfolio of 128 buildings in Canada, Europe, and the United States. It also has 12 properties in development. If you are not familiar, industrial properties have been one of the strongest real estate asset classes.

Factors like near shoring, rising e-commerce, and limited supply have drastically pushed up occupancy and rental rates. Right now, Granite has 99.6% occupancy, and an average lease term of 6.7 years. Even without acquiring new properties, this REIT expects to grow by the high single digits in 2023.

Today, Granite stock earns a 3.8% distribution yield. This passive-income stock has increased its distribution for 12 consecutive years. Its distribution-payout ratio at 65% keeps the distribution growth very sustainable here.

CN Rail: Assets you can’t replace

Canadian National Railway stock has beaten the market for nearly three decades. Over the past 10 years, its stock has delivered 13.9% average annual return. With a 1.9% dividend yield, its passive-income stream might seem underwhelming. Yet it has grown its dividend annually by a low-teens rate for years.

CN Rail is an essential business to the North American economy. There is no other affordable alternative to transport bulk goods and commodities across the continent.

As a result, this company holds a very strong competitive edge. It has a new management team looking to maximize its efficiency and profitability. If successful, this stock will keep growing its dividend for many years ahead.

Brookfield Asset Management: A long-term, passive-income stock

Brookfield Asset Management stock does not have the same type of long-term history, as the stocks above. It was only spun-out of Brookfield Corporation late last year. However, this company has been building out a leading-class alternative asset management business for a decade.

Brookfield Asset Management manages assets for both its parent and external investors. Yet it doesn’t hold any of these assets on its balance sheet, so it is a very clean investment. It just collects fees for its services, and most of those fees (and fee growth) are locked in for years.

This passive-income stock earns a 3.9% dividend yield. Given that it plans to distribute around 90% of its earnings, its dividend should also grow with its earnings over the coming years and decades.

The post Passive Income: 3 Safe Dividend Stocks to Own for Decades Ahead appeared first on The Motley Fool Canada.

Should You Invest $1,000 In Brookfield Asset Management?

When our analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for nearly a decade, Motley Fool Stock Advisor Canada, is beating the TSX by 21 percentage points.*

They just revealed what they believe are the 5 best stocks for investors to buy right now… and Brookfield Asset Management made the list — but there are 4 other stocks you may be overlooking.

See the 5 Stocks * Returns as of 4/18/23

(function() { function setButtonColorDefaults(param, property, defaultValue) { if( !param || !param.includes('#')) { var button = document.getElementsByClassName("pitch-snippet")[0].getElementsByClassName("pitch-button")[0]; button.style[property] = defaultValue; } }

setButtonColorDefaults("#5FA85D", 'background', '#5FA85D'); setButtonColorDefaults("#43A24A", 'border-color', '#43A24A'); setButtonColorDefaults("#fff", 'color', '#fff');>

More reading

3 ESG Stocks You Can Buy and Hold For Decades TSX Today: What to Watch for in Stocks on Tuesday, April 25 Better Buy: Brookfield Asset Management or Brookfield Stock? 3 No-Brainer Stocks I’d Buy With $400 Right Now Unlock Your TFSA’s Potential: 2 High-Yield Heavyweights for Knockout Dividend Growth

Fool contributor Robin Brown has positions in Brookfield, Brookfield Asset Management, and Granite Real Estate Investment Trust. The Motley Fool recommends Brookfield, Brookfield Asset Management, Brookfield Corporation, Canadian National Railway, and Granite Real Estate Investment Trust. The Motley Fool has a disclosure policy.

https://www.fool.ca/2023/04/25/passive-income-3-safe-dividend-stocks-to-own-for-decades-ahead/

Comments

Post a Comment

Popular posts from this blog

My No-Brainer High Yield Dividend Stock to Buy In 2023

Image
High-yield dividend stocks always deserve consideration. Sometimes, they’re high-yield because they’re about to blow up. But sometimes, there’s a mispricing at play. And this is when things get very enticing. Let’s look at 9.4% yielding Northwest Healthcare Properties REIT (TSX:NWH.UN) as an example. Is this the opportunity of a lifetime? 9.4% yield is a big deal Northwest Healthcare Properties REIT (TSX:NWH.UN) is a real estate investment trust (REIT) that owns and operates a lucrative portfolio of global healthcare real estate assets. In fact, its $10.6 billion , 233 property portfolio is complimented by a $12.5 billion funds management business. All told, Northwest’s business is a well-diversified business that is relatively well sheltered from rising inflation and economic hardship. This plays out in two ways. Firstly, revenues are directly tied to inflation. Essentially, its assets (properties) are long-leased and inflation indexed. Also, the healthcare indust...
Read more

What is The Most Undervalued Asset? It's Not what You Expect

Image
Tyler Tysdal and Robert Hirsch Share Knowledge in the Business World At Freedom Factory®, we have experienced and witnessed the explosive results of entrepreneurs aligning passion and purpose to create extraordinary value. However, most entrepreneurs have no idea how to maximize the value of their business and move on to the next chapter of their lives. That’s where we can help. Contact Freedom Factory Freedom Factory® has radically disrupted the way high-growth, lifestyle companies are bought and sold, which historically was a horribly inefficient market. When I sold my first company in the 1990s, I went to several investment banks and sold my business to one of less than five companies they called. Looking back, I see exactly how much money I left on the table and knew that there had to be a better way. The bottom line is that entrepreneurs don’t speak banker, and bankers sure don’t speak entrepreneur. Contact Tyler Tysdal at Freedom Factory Freedom Factory 5500 Greenwood Plaz...
Read more

Cineplex (TSX.CGX). Worth the Risk?

Image
There’s no such thing as a stock that doesn’t carry at least some risk. Seasoned investors will often be quick to remind some of the links between risks and rewards. But does that apply to all investments? When it comes to Cineplex (TSX:CGX), is an investment in the company really worth the risk? Let’s try to answer that question. Risk vs. reward: Time to set expectations There’s an old saying that goes something like this: the greater the risk, the greater the reward. Unfortunately, that’s not always the case. Some investments are rife with risk and will take nothing short of a miracle for any type of reward. Others can offer some reward with very little risk. Whether or not Cineplex is worth the risk isn’t as clean cut. Where exactly does Cineplex fall? In short, Cineplex has more than its share of problems. Canada’s largest entertainment company has seen its theatre audience shrink during the pandemic. Following a dismal set of results in 2020, the figures for 2021 do sh...
Read more