Want Decades of Passive Income? 3 Stocks to Buy Right Now

Passive income can be great in the short term, but even better in the long term. And these three dividend stocks look ultra valuable.

Amy Legate-Wolfe

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote: “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published October 25, 2024 3:30 pm EDT

Creating a reliable stream of passive income through dividend stocks is a time-tested strategy that can yield significant results over the long term. But which stocks offer robust dividends and have the potential to deliver strong returns for decades? Today, let’s dive into three stocks that can be a powerful addition to your portfolio for creating passive income.

Renewable energy

Brookfield Renewable Partners (TSX:BEP.UN) is one of the leading renewable energy companies globally, offering a dividend yield of about 4.8%. As the world transitions to greener energy, BEP.UN is well-positioned to capitalize on this growing demand. Its portfolio includes wind, solar, and hydroelectric power assets, and it continues to expand.

While BEP.UN has faced some headwinds, such as a challenging interest rate environment affecting capital-intensive projects, its long-term prospects are strong. The renewable energy sector is expected to grow exponentially over the next decade, thus making BEP.UN a solid choice for passive income.

Telecom

BCE (TSX:BCE) is a telecommunications giant in Canada with a dividend yield of around 8.6%. BCE offers stability, as communication services are a necessity. Plus it holds a dominant position in the Canadian market.

The company has faced some struggles recently, including slower growth and competitive pressures. Yet its consistent cash flow from its services ensures that dividends remain solid. BCE has a track record of increasing dividends. This makes it attractive for income investors. With steady revenue from its broad range of services and 5G network expansion, BCE is a reliable dividend payer for long-term investors.

Utilities

Fortis (TSX:FTS) is a North American utility company that provides electric and gas services. Known for its impressive dividend history, Fortis has increased its dividends for 50 consecutive years. The current yield is about 4%, making it a favourite among income investors.

Utility companies like Fortis are often seen as safe havens in volatile markets. That’s thanks to its regulated nature and consistent revenue. Although the utility sector has faced challenges from rising interest rates, Fortis continues to invest in clean energy and infrastructure., thus positioning itself for future growth while delivering steady dividends.

Why these work

The future outlook for these stocks is promising. Renewable energy is expected to see a massive surge in the coming years, making BEP.UN particularly exciting for growth. Fortis, with its focus on expanding its clean energy projects, will benefit from the shift toward sustainability. Meanwhile, BCE’s continued dominance in telecommunications, coupled with its dividend-friendly policy, ensures stability.

Sector struggles can’t be ignored, though. Rising interest rates have been a hurdle, especially for capital-intensive sectors like utilities and renewable energy. Higher borrowing costs can put pressure on companies’ finances and reduce their ability to invest in growth. However, companies like Fortis and BEP.UN have managed their debt wisely and continue to grow despite the challenges. BCE, with its high dividend payout, is also facing challenges in maintaining its growth rate, but it remains a dominant player in a non-cyclical industry.

Bottom line

Building passive income through these stocks means focusing on long-term performance and dividend reinvestment. By continuously reinvesting the dividends you earn from BEP.UN, BCE, and FTS, you can benefit from compounding. This can significantly boost your returns over time. Even if stock prices fluctuate in the short term, the steady dividend payments provide a consistent source of income that can grow as these companies continue to perform.

Therefore, BEP.UN, BCE, and Fortis represent three strong dividend-paying stocks that can create decades of passive income. The focus on essential services and future-forward sectors like renewable energy ensures that they will remain relevant for years to come. By investing in these stocks and reinvesting the dividends, you can build a sustainable income stream that grows alongside your portfolio.