Passive-Income Investors: 3 Dividend Stocks I’d Buy Today
Building a source of passive income is the goal for many investors. There are many ways you can do that, but buying dividend stocks may be the most common. Thereâs a relatively low barrier to entry, and investors can remain very liquid. Although investing in dividend stocks is much easier, in my opinion, than investing in growth stocks, many investors still get this wrong. There are very specific things you should be on the lookout for. In this article, I’ll discuss three dividend stocks Iâd buy today.
Buy a utility stock
When looking for dividend stocks, I first turn to the utility sector. This is because utility companies tend to receive a very stable and predictable source of revenue. That makes it very easy for those companies to plan dividend distributions in the future. Fortis (TSX:FTS)(NYSE:FTS) is an excellent example of this. It provides regulated gas and electric utilities to over three million customers across Canada, the United States, and the Caribbean.
Fortisâs recurring revenue has helped it become one of the most reliable dividend stocks in Canada. It has managed to increase its dividend distribution in each of the past 47 years. That means that Fortis has continued to grow its distribution through the Great Recession and the COVID-19 pandemic. If I could only buy one dividend stock today, Iâd likely go with Fortis.
Railway companies could be a good choice
Passive-income investors should also consider buying shares of a railway company. In Canada, the railway industry is dominated by two large enterprises. Both of those companies have established very formidable presences with track spanning coast to coast. Although Iâd say both companies are worth taking a look at, if you could only buy one of them, Iâd suggest investing in Canadian National Railway (TSX:CNR)(NYSE:CNI).
The reason Iâd recommend Canadian National over its peer is that this company has shown a much stronger history of dividend payment. Over the past 25 years, Canadian National has managed to increase its dividend distribution. Thatâs more than double the dividend-growth streak of its industry peer. With a dividend-payout ratio of about 37%, Canadian National could continue to comfortably increase its dividend over the coming years.
Think of companies with good cash flow
Overall, dividend investors should focus on buying shares of companies with excellent cash flow. Alimentation Couche-Tard (TSX:ATD) is an example of such a company. You may not have considered this stock much at all, but its business is actually very appealing. Alimentation operates over 14,000 convenience stores across 14 countries. Whatâs interesting about this is usually customers donât walk into a convenience store to browse. Theyâre usually there out of necessity. That keeps the cash flowing well over at Alimentation.
Over the past five years, Alimentation Couche-Tard has managed to grow its dividend at a very impressive rate (CAGR of 19.6%). It has also managed to increase its distribution in each of the past 11 years, putting it among the elite dividend stocks in Canada. If youâre interested in a dark horse stock for your dividend portfolio, consider Alimentation Couche-Tard.
The post Passive-Income Investors: 3 Dividend Stocks Iâd Buy Today appeared first on The Motley Fool Canada.
Before you consider Canadian National Railway, we think youâll want to hear this.
Our nearly S&P/TSX market doubling* Stock Advisor Canada team just released their top 10 starter stocks for 2022 that we believe could supercharge any portfolio.
Want to see if Canadian National Railway made our list? Get started with Stock Advisor Canada today to receive all 10 of our starter stocks, a fully stocked treasure trove of industry reports, two brand-new stock recommendations every month, and much more.
See the 10 Stocks
* Returns as of 4/14/22
setButtonColorDefaults(“#5FA85D”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43A24A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
3 Safe Dividend Stocks for Beginners to Buy in a Market Correction
Passive Income: 3 TSX Stocks With Incredibly Fast-Growing Dividends
TFSA Passive Income: 2 Top TSX Dividend Stocks to Own for the Next 20 Years
2 Cheap TSX Dividend Stocks to Buy in the Market Correction
Market Correction: 2 Oversold TSX Dividend Stocks to Buy for the Rest of 2022
Fool contributor Jed Lloren has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alimentation Couche-Tard Inc. The Motley Fool recommends Canadian National Railway and FORTIS INC.
18 total views, 2 views today