Here are five “forever” dividend stocks that are candidates as core holdings in diversified portfolios that target long-term wealth building.
Image source: Getty Images
Manulife stock
Since cutting its dividend around 2009 during the global financial crisis, the life and health insurance company has turned over a new leaf. In the past decade, it increased its adjusted earnings per share by 10% per year. In the same period, it healthily raised its dividend by 10.9% per year.
At $37.10 per share at writing, Manulife (TSX:MFC) stock is reasonably priced at a blended price-to-earnings ratio (P/E) of about 10.3. Over the next few years, if it continues to deliver stable results, it has the potential to deliver total returns of more or less 12% per year. Its dividend yield of 4.3% is supported by a sustainable payout ratio of about 43% of adjusted earnings this year.
TD stock
When talking about financial services stocks, of course, we cannot leave out big Canadian bank stocks that are some of the oldest dividend payers of our country. In particular, Toronto-Dominion Bank (TSX:TD) stock has paid out dividends every year since 1857. Its 10-year dividend-growth rate is 9% per year, which is not bad at all.
TD Dividend Yield data by YCharts
TD stock is trading at similar levels as in 2021. At $76.74 per share at writing, it trades at a blended P/E of approximately 9.6, which is a discount of about 18% from its long-term normal P/E. At this quotation, the large North American bank stock offers a relatively high dividend yield of 5.3%. It’s a good time to invest in a bank that makes durable earnings.
Rogers Communications stock
Since we experienced higher interest rates from 2022, telecom stocks that have heavy debt on their balance sheets had sold off. Specifically, Rogers Communications (TSX:RCI.B) stock lost 16% of its value since then compared to the average decline of 31% for the other two big Canadian telecom stocks. So, Rogers Communications stock has been more resilient.
At $50.42 per share at writing, the dividend stock trades at a blended P/E of about 10.7, which is a steep discount of 34% from its long-term normal valuation. Rogers has an investment-grade S&P credit rating of BBB-. In a higher interest rate environment, its fair value is weighed down and analysts believe it trades at a discount of 26%. Its dividend yield of almost 4% is safe.
Brookfield Infrastructure Partners
There’s a multi-decade long growth runway for the infrastructure industry globally, which will benefit Brookfield Infrastructure Partners (TSX:BIP.UN). It owns and operates critical infrastructure networks internationally, including regulated utilities, railroads, toll roads, transmission pipelines, data centres, etc.
The top utility stock generates quality funds from operations (FFO) that are 90% regulated or contracted and 85% protected from inflation. Its contracted FFO has a weighted average duration of about 10 years. It targets FFO per unit growth of over 10% per year, which helps support a growing cash distribution.
It pays out a U.S. dollar-denominated cash distribution. At $41.52 per unit at writing, it offers a nice cash distribution yield of 5.3%, and analysts believe it trades at a discount of over 20%.
Loblaw
Although Loblaw (TSX:L) stock pays little income, yielding only 1.2%, it is a worthy core holding. The grocery store chain was able to increase its adjusted earnings per share by 11.5% per year over the past decade. In the period, it also raised its dividend at a healthy pace of 8.6% per year.
Loblaw earns an investment-grade S&P credit rating of BBB+. At $165 and change per share, it trades at a blended P/E of about 20, and analysts believe the stock is fairly valued. If possible, interested investors should aim to buy shares of the defensive holding on market corrections.
