Tuesday, May 30th, 2023

2 Stocks for Decades of Passive Income

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Written by Adam Othman at The Motley Fool Canada

There are several approaches to stock market investing that Canadians can take to achieve their short- and long-term financial goals.

Putting your money to work in the stock market can help you do everything from building a self-directed retirement portfolio to creating a passive-income stream. Income-generating assets like dividend stocks offer the best opportunity to create a passive-income stream in your investment portfolio.

When it comes to dividend investing, the Canadian stock market has no shortage of options to consider. The TSX boasts several high-quality stocks with long histories of paying shareholders their dividends and growing payouts each year. If you want to create a passive-income stream, you must identify, invest in, and hold shares of dividend stocks capable of reliably paying you for decades.

Today, we will look at two Canadian Dividend Aristocrats you can add to your portfolio for this purpose. Not only do the two dividend stocks pay investors regularly, but the underlying companies have also increased payouts each year for over 20 years.


Fortis (TSX:FTS) is a $27.31 billion market capitalization utilities holding company. The company owns and operates a portfolio of natural gas and electricity utility businesses across Canada, the U.S., Central America, and the Caribbean.

Since it provides essential services, Fortis stock can continue generating stable income, regardless of the market cycle. Granted, it cannot deliver stellar growth through capital gains in bull markets. Still, Fortis stock can offset losses during bear markets due to its stability.

Fortis generates most of its revenue through long-term contracted assets in highly rate-regulated markets. It means the stock creates predictable cash flows that the company’s management can use to fund its capital programs, quarterly payouts, and grow its dividends comfortably.

As of this writing, Fortis stock trades for $56.86 per share and boasts a juicy 3.97% dividend yield. It has increased its payouts for the last 49 years and is on track to hit the 50-year mark.

Canadian National Railway

Canadian National Railway (TSX:CNR) is another Canadian Dividend Aristocrat that can earn you passive income for decades. In operation for over a century, it has paid dividends to its shareholders since 1997 and increased its payouts annually for the last 20 years. It has raised its payouts by a 16% compounded annual growth rate (CAGR).

The $105.44 billion market capitalization railway operator owns one of the largest railway networks in North America. Over the last 100 years, CN Railway has built infrastructure that no other player in the industry can match. Enjoying a strong competitive moat, immense pricing power, and providing a service essential to the economy, CN Railway’s revenue is secure.

As of this writing, CN Railway stock trades for $156.28 per share and pays at a meagre but sustainable 2.02% dividend yield. While it offers a low-yielding payout than many other TSX dividend stocks, it offers stability and reliability that few can match.

Foolish takeaway

By building a massive portfolio of dividend stocks, you can earn a substantial amount in dividend income. If you remain invested for decades, you can watch your account balance grow. To accelerate wealth growth, consider reinvesting the payouts to purchase more shares of the dividend stocks.

By doing this, you can unlock the power of compounding to increase your portfolio’s size and earn even more through dividends.

Fortis stock and CN Railway stock boast lengthy track records, solid business models, stable income, and dividend-growth streaks. These two stocks can be excellent foundations for such a self-directed portfolio.

The post Dividend Investors: 2 Stocks for Decades of Passive Income appeared first on The Motley Fool Canada.

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Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends Canadian National Railway and Fortis. The Motley Fool has a disclosure policy.


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