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2 “SWAN” Dividend Stocks for Passive Income (AKA “Sleep Well at Night” Stocks)

money while you sleep
Image source: Getty Images

Written by Kay Ng at The Motley Fool Canada

Are you looking for “SWAN,” or “sleep well at night,” dividend stocks? Here are a couple of prime examples of SWAN dividend stocks you can depend on and buy and hold — ideally forever. They should allow you to generate passive income peacefully in your sleep.

RBC stock

Royal Bank of Canada (TSX:RY) is one of the most reliable Canadian bank stocks you can own for the long haul. It just reported its quarterly earnings results last Thursday. In the first half of the fiscal year, the bank increased its adjusted revenue by 11%, but its adjusted non-interest expense rose 16%.


Because Canada and the United States expect to experience a recession this year, generally, Canadian banks — RBC included — are having higher provision for credit losses (PCL) this fiscal year. Specifically, its fiscal year-to-date PCL is $1,132 million compared to a release of $237 million of the reserve in the first half of fiscal 2022. This weighed on RBC’s adjusted earnings per share, which declined 2% to $5.76. Its PCL on impaired loans of average net loans remained low at 0.19%, despite being up 111% from 0.09% a year ago.

Notably, the bank’s payout ratio remained healthy at about 46%. And it’s boosted investor confidence by raising its quarterly dividend by 2.9% to $1.35 per share, equating to an annualized payout of $5.40. At $123.08 per share at writing, the blue-chip stock yields close to 4.4% and trades at a discount of just over 10%.

Brookfield Infrastructure

Brookfield Infrastructure Partners (TSX:BIP.UN) is another SWAN stock you can depend on for growing passive income. Since it was spun off from its parent company, the utility stock has increased its cash distribution every year for about 15 consecutive years. For reference, its five-year cash-distribution growth rate is 6.6%.

Only 44% of its funds from operations (FFO) is generated in North America. So, it provides diversification geographically and across infrastructure type. Management sees significant capital deployment opportunities globally across infrastructure assets in utilities, transport, midstream, and data.

It forecasts FFO per unit at a compound annual growth rate (CAGR) of north of 10% that can drive cash distribution growth of 5-9% annually and total returns of 12-15%. A part of its growth plan is to redeploy capital from the sale of mature assets. The company was able to invest about US$2.4 billion in new acquisitions over the last 12 months.

At $49.38 per unit at writing, analysts believe Brookfield Infrastructure trades at a discount of just over 15%. As well, it offers a decent yield of 4.2%.

Unless you hold the BIP.UN shares in registered accounts, the tax reporting of the cash distribution may be a little complicated. That said, investors can also own the Brookfield Infrastructure Corp. shares, which are economically the same as BIP.UN units but pay out dividends and trade at a steep premium of close to 30% (and therefore yield north of 3.2%) at writing.

Investor takeaway

Even for SWAN stocks that are some of the best stocks to invest in, investors should still watch out for the valuation. That is, aim to buy shares at a discount, because there are always some events, including macro headwinds like rising interest rates or recessions, that can put stocks on sale.

The post 2 “SWAN” Dividend Stocks for Passive Income (AKA “Sleep Well at Night” Stocks) appeared first on The Motley Fool Canada.

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Fool contributor Kay Ng has positions in Brookfield Infrastructure Corp. and Brookfield Infrastructure Partners. The Motley Fool recommends Brookfield Infrastructure Partners. The Motley Fool has a disclosure policy.