Dividend investing is often used as a passive investing strategy. The idea is to buy and hold quality dividend stocks. At the very least, these dividend stocks should pay out healthy dividends that are well protected. Ideally, though, they should be increasing their dividend payouts over time.
That said, a passive dividend investing strategy still requires some active investing. For example, non-retired investors would likely be adding to their holdings over time, especially on dips or market corrections. They need to know what price or yield ranges are good for adding and that could change over time.
For example, with stocks like Pepsi (NASDAQ:PEP) and Fortis (TSX:FTS)(NYSE:FTS) that earn stably growing earnings, you can use their yields as a gauge on when to buy. It would be a yield of about 3.2% for Pepsi and 4% for Fortis.
Utilities are a key component of solid dividend portfolios. Here are 3 utilities that provide current yields of about 3.5-4.4%. They’re fairly valued. Going through these examples will lead to an answer for the question in the title.
Brookfield Infrastructure Partners L.P. (TSX:BIP.UN)(NYSE:BIP) split-adjusted funds from operations per unit (“FFOPU”) increased by 2% in 2020 during the pandemic, proving itself to be a defensive business in the face of adversity.
In the first half of the year (“H1”), BIP rebounded to growth with its split-adjusted FFOPU rising almost 19% to US$1.77. Contributing factors include an economic rebound, management taking advantage of market volatility during the 2020 pandemic market crash (such as by scooping up shares of Inter Pipeline (TSX:IPL) at basement prices), capital recycling, etc. Its H1 2021 payout ratio was 58% of FFO, which is a healthy payout ratio.
BIP remains one of our favourite utilities for income. We trust that management can live up to its word by increasing its cash distribution by 5-9% per year going forward.
I was absolutely thrilled to find out about Canadian Net REIT (TSXV:NET) around April this year, which is about when I started buying the quality real estate investment trust (REIT) in my Tax-Free Savings Account (TFSA). You might know the company, which is formerly known as Fronsac REIT (TSXV:FRO.UN).
I found the top-notch dividend stock when I was going through the Canadian Dividend All-Star List — you can obtain the latest version here. Just to be clear, I’m not affiliated with that website in any way. The author explains the list as “a free spreadsheet with an abundance of useful dividend screening information on Canadian companies that have increased their dividend for five or more years in a row.”
I haven’t found any similar company as Canadian Net REIT on the Canadian exchanges (yet). There are bigger versions of it on the NYSE though, including Realty Income (NYSE:O) and the like.