How can you be sure that the dividend company you are investing in will continue paying its dividends or won’t slash the payout? That’s a question many novice investors might have, and the answer is that it’s impossible to be a 100% sure.
Even if you choose an established industry giant and a Dividend Aristocrat with a proven history of growing their payouts for many years, you may still experience a dividend cut. An example is Suncor.
However, that’s still the best way to be sure — i.e., choosing Dividend Aristocrats with an adequately long history of raising their dividends for consecutive years. There are three that have grown their payouts for at least a decade and also offer decent capital-appreciation potential.
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The banking giant
Royal Bank of Canada (TSX:RY) is an incredibly safe bet and one of the most coveted bank stocks in the country, even if you don’t take its stellar dividend history into account. As one of the largest banks in North America and the largest in the country, it offers enormous stability.
It has also shown good resilience and recovery during several financial crises, the most recent ones being the Great Recession and the 2020 crash.
As a Dividend Aristocrat, the bank has grown its payouts for at least 11 consecutive years. It’s currently offering a decent 3.95% yield, and a payout ratio is quite solid as well, and even though it broke through the 50% “safe line” during COVID, it remained below 60%, indicating the financial strength backing up the dividends.
The bank also offered modest capital-appreciation potential, as it has seen its stock rise over 120% in the last decade.
An insurance giant
Another “largest-in-the-country” Aristocrat you may consider investing in is Intact Financial (TSX:IFC). It’s the largest property and casualty insurance company in the country and is growing its presence in multiple international markets, making it more secure against local headwinds.
In addition to the security it offers as a leader in its industry, the insurance company also offers decent dividend stability. It has been growing its payouts for 17 consecutive years and is inching closer to the more stringent U.S. threshold of measuring Aristocrats — i.e., 25 consecutive years of dividend growth.
A stable payout ratio of roughly 26% makes the stock quite attractive to investors, though the yield is not on par (1.9%). But what the stock lacks in dividends, it makes up for in its growth potential, as it has grown over 217% in the last decade.
The railway leader
Canadian National Railway (TSX:CNR) is one of the oldest Aristocrats in the country and has raised its payouts for 26 consecutive years, making it an Aristocrat across the border as well, where it trades on the NYSE. It’s also the larger of two railway giants in the country.
Canadian National Railway is a formidable entity in the local cargo/freight business. Its tracks connect three major ports in North America, and, in addition to offering affordable mass cargo transportation services to a variety of clients via its rail routes, the company also has a strong trucking wing.
It’s currently offering a 1.7% yield, but the dividends are quite secure (financially), and the stock’s potential as an investment is substantiated by its growth history. It saw a rise in the market value of about 280% in the last 10 years.
Foolish takeaway
The three blue-chip stocks are steady and safe growers, offering reliable dividends and an impressive combined dividend-growth streak of over 54 years. Assuming they remain true to their stellar growth and dividend histories, you may hold them for decades and experience steady wealth building over the years.
