Yahoo Finance 1 Dividend Stock I’m Buying for Superior Passive Income in 2024
Written by Jed Lloren at The Motley Fool Canada
Investing in dividend stocks is one of my favourite strategies. That’s because, through those kinds of assets, investors can generate a steady source of passive income. In my opinion, it’s the passive income source with the lowest barrier to entry. In addition, it truly feels passive, whereas other methods of passive-income generation aren’t truly passive (i.e., rental properties), unless you hire someone to manage things for you, and that’ll eat away at your profits.
When looking for dividend stocks to hold in my portfolio, I tend to focus on Dividend Aristocrats. In Canada, these are stocks that have increased dividend yields for at least five consecutive years. What that tells me, when a stock is listed as a Dividend Aristocrat, is that its management team has great capital-allocation habits.
Another way of determining whether a company has great capital-allocation habits is by checking to see how successful it can pay its shareholders a dividend. For example, all things being equal, I would likely choose to invest in a dividend stock that has been paying its shareholders every year for the past 25 years over one that has only been paying shareholders for two years.
Finally, investors should look to buy shares of dividend stocks that have a dividend-growth rate of more than 2%. This is important because if a dividend stock isn’t capable of at least matching the long-term inflation rate, then you’ll be losing buying power over time.
What dividend stock am I buying?
For superior passive income, I’m buying shares of Fortis (TSX:FTS). This is a stock that I like very much. It’s a leader within the North American utility industry. In fact, Fortis serves more than three million customers across Canada, the United States, and the Caribbean. Fortis’s services include providing regulated gas and electric utilities.
A bona fide Canadian Dividend Aristocrat, Fortis has increased its dividend distribution in each of the past 50 years. To put that into perspective, consider how many negative events have happened in the stock market over that period. For example, the COVID-19 pandemic and the Great Recession come to mind. Through all of those events, Fortis has managed to allocate capital in a way that allowed them to continue raising dividends.
What makes Fortis’s dividend-growth streak even more impressive is that the next longest dividend-growth streak (in Canada) is nearly two decades shorter.
Fortis has already announced its plans to continue raising its dividend at a rate of 4-6% over the next four years. That could help investors stay ahead of inflation for years to come.
Foolish takeaway
If you’re interested in passive income, then my suggestion would be to take a look at dividend stocks. In particular, dividend stocks with the ability to raise distributions over time have a long history of consistent dividend payments and a high dividend-growth rate should be focused on. A company like Fortis would be a great one to look into, and it is certainly a stock I’m buying for passive income.
The post 1 Dividend Stock I’m Buying for Superior Passive Income in 2024 appeared first on The Motley Fool Canada.
Should you invest $1,000 in Fortis right now?
Before you buy stock in Fortis, consider this:
The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Fortis wasn’t one of them. The 10 stocks that made the cut could potentially produce monster returns in the coming years.
Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $17,988!*
Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 35 percentage points since 2013*.
See the 10 stocks * Returns as of 1/24/24
More reading
Can You Guess the 10 Most Popular Canadian Stocks? (If You Own Them, You Might Be Losing Out.)
How to Build a Bulletproof Monthly Passive-Income Portfolio in 2024 With Just $25,000
Fool contributor Jed Lloren has positions in Fortis. The Motley Fool recommends Fortis. The Motley Fool has a disclosure policy.
2024