What does passive income represent to you? Is it potential freedom from the nine-to-five grind, or is it reliability in a sea of uncertainty? Whatever it means to you, dividend stocks are a good way to make this dream a reality. Because building a passive income dividend stream is relatively easy when you focus on safe stocks that you can own for the long term.
Without further ado, here are two safe dividend stocks to help you catapult your way to significant, worry-free dividend income.
Altagas
As an energy infrastructure giant with a strong position in both the utility and midstream industries, Altagas Ltd. (TSX:ALA) has a bright future. Altagas' regulated utilities business underpins this future and supports the rapid growth of global exports of natural gas.
As a reflection of the strength in Altagas' business, we need to look no further than its financial results. Annual revenue has increased 137%, or at a compound annual growth rate (CAGR) of 19% since 2019. Also, the company's cash flow from operations has grown at 81%, or a CAGR of 13% in this same time period. This has been driven by rate increases in Altagas' utility business, as well as strong global demand growth for natural gas liquids.
Altagas' latest quarter reflected the same positive fundamentals, with revenue and cash flow increasing steadily to $2.6 billion and $1 billion, respectively. Looking ahead, we can expect Altagas to continue to derisk its midstream business, effectively securing increasingly stable and predictable earnings and cash flow.
All of this has given Altagas an enviable dividend track record, which I expect will continue. In fact, since 2019, Altagas' annual dividend has increased 272%, or at a CAGR of 30% – and its dividend yield is an attractive 3.5%. Also, as you can see from the graph below, Altagas stock has increased 74%.
Altagas' business is increasingly the kind of safe and predictable business that passive income investors would want to rely on for passive dividend income.
Fortis
As far as safe dividend stocks go, Fortis Inc. (TSX:FTS) is one of our best bets. Simply put, Fortis stock is a gem for passive income investors. This is because of its 50-year track record of annual dividend increases. It's also because of the safety and predictability of its revenue stream.
But what makes Fortis so safe? Well, it's a function of the industry that it's in, the utility industry. The utility industry provides energy for businesses and homes alike to function. Energy is needed regardless of the economic environment. In fact, it's one of the last expenditures to be cut in difficult times – if it's ever cut. Simply put, we can't live without it. This means that Fortis' revenue is highly predictable and reliable – qualities that make for excellent passive income ideas or investments.
As a testament to the predictability of the business, we have the company's unrivalled dividend history. We also have the company's bullish forecasts. For example, Fortis management is forecasting a 4% to 6% average annual dividend growth rate to the year 2028. This guidance is a strong indicator of the profitability and predictability of the business.
The bottom line
In closing, I would like to highlight that the best passive income ideas discussed in this article have a degree of safety that is unmatched. This is a function of their involvement in the utilities business, which by its very nature, is predictable and reliable. These safe stocks are set up to continue to provide passive income investors with reliable dividend income for many years to come.
