Passive Income: 3 Safe Dividend Stocks to Buy and Hold for the Next 10 Years (2024)

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Here’s why blue-chip dividend stocks such as Canadian National Railway should be part of your equity portfolio right now.

Investing in quality blue-chip dividend stocks is a proven strategy to create a reliable stream of passive income. Historically, blue-chip stocks enjoy a wide competitive moat, resulting in stable cash flows and dividend payouts across market cycles. Further, these companies generally raise their dividend payouts each year, enhancing the effective yield over time.

Here are three safe dividend stocks TSX investors can buy and hold for the next 10 years.

Royal Bank of Canada stock

A domestic heavyweight, Royal Bank of Canada (TSX:RY) currently offers a forward yield of 4.1%. Despite a challenging macro environment, Royal Bank of Canada reported adjusted earnings of $4.1 billion, or $2.85 per share, in the fiscal first quarter (Q1) of 2024 (ended in January). It beat consensus estimates of $2.06 per share on the back of strong performance from its high-margin businesses such as wealth management and asset management.

RBC’s diversified business segments helped it mitigate the increases in PCLs or provisions for credit losses. A prudent risk-management framework also means PCLs and impaired loans are within the guidance issued in the last quarter.

A strong liquidity position provides RBC with the flexibility to accommodate for deterioration in credit quality. Moreover, RBC ended Q1 with a liquidity coverage ratio of 132%, indicating a $94 billion surplus above the regulatory minimum.

Canadian National Railway stock

Valued at $114 billion by market cap, Canadian National Railway (TSX:CNR) pays shareholders an annual dividend of $3.38 per share, amounting to a yield of 1.9%. Similar to other companies, Canadian National Railway is wrestling with an inflationary environment. For instance, its labour costs rose by 12% year over year, resulting in a 4% decline in earnings per share in Q4 of 2023.

However, the TSX giant still generated a free cash flow of $3.9 billion and invested $3.1 billion in capital expenditures. CNR continues to invest in its rail car fleet and track maintenance as well as capacity expansions.

Priced at 22 times forward earnings, CNR stock might seem expensive. However, analysts expect its earnings to expand by roughly 10% annually in the next five years.

Metro stock

Part of a recession-resistant sector, Metro (TSX:MRU) pays shareholders an annual dividend of $1.34 per share, indicating a yield of 1.84%. In fiscal Q1 of 2024 (which ended in December), Metro reported sales of $4.97 billion, up 6.5% year over year. Food same-store sales rose 6.1%, while online sales more than doubled in Q1 due to higher partnership sales.

Metro recorded solid results in Q1 due to strong performance across businesses. Its discount food stores continue to grow sales at a steady pace, while private label partnerships touched record numbers. The company ended Q1 with 2.5 million members for its loyalty program, which should result in recurring cash flow going forward.

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Metro opened a new 600,000-square-foot automated fresh and frozen distribution centre last October and continues to ramp up operations. These investments in modernizing its supply chain and retail networks should create long-term value for shareholders.

Priced at 17.1 times forward earnings, Metro stock is forecast to grow earnings by 7.4% annually in the next five years.