2 Smart Stocks to Buy and Hold for Years

The banking crisis we’re experiencing may be scaring you away from bank stocks. However, investors shouldn’t freeze and forget about investing in stocks. If you prefer to stay away from the banking sector for the time being, that’s okay.

You can choose to be conservative and invest in other stocks that tend to have stable underlying business performance. On top of that, you might add another requirement: dividends.

Here are a couple of smart stocks that you can consider to buy and hold for years to earn passive income from dividends. In fact, they’re likely to increase your dividend income over time.

TELUS stock

TELUS (TSX:T) is one of the Big Three Canadian telecoms that provides essential internet services and mobile phone plans. In an oligopoly structure, it’s able to benefit from having large scale and cost efficiency, as the population increases (for example, from immigration).

The company has invested billions of dollars in its network. So, it can easily add more subscribers to its network. The company has also invested in high-growth areas, including TELUS International that provides end-to-end IT service solutions from idea generation to user experience or user interface design to the final delivery of the solution, TELUS Health that provides health technology services, and digital solutions and data insights for agriculture and consumer goods businesses.

Last year, TELUS’s payout ratio was 74% of earnings. At $27.20 per share at writing, it offers a good dividend yield of roughly 5.15%. This is 7% greater in income than the best one-year Guaranteed Investment Certificate (GIC) rate. Of course, by definition, stocks are riskier investments than risk-free GICs.

So, for compensation, investors can get higher income from the stock (as long as it doesn’t cut its dividend) as well as potential price appreciation, which is more likely to materialize over a longer investment time frame, such as over five years.

TELUS stock’s dividend outlook seems solid. It has increased its dividend for almost 20 years now. And it intends to increase its dividend by about 7-10% per year through 2025. All investments come with risk. For Canadian big telecoms, there have been complaints about their high fees versus other countries.

Brookfield Infrastructure stock

Perhaps investors can be more at ease with a buy-and-hold investment in Brookfield Infrastructure Partners (TSX:BIP.UN) stock. The utility owns and operates a diversified portfolio of quality infrastructure assets across North and South America, Asia Pacific, and Europe in the utilities, transport, midstream, and data sectors.

Since the TSX stock started being listed independently on the stock exchange in 2008, it has been paying an increasing cash distribution. Its 10-year dividend-growth rate is about 9%.

In a higher interest rate environment, the stock has corrected about 20% from its 2022 high. This allows investors to grab shares at a decent cash-distribution yield of close to 4.8%.

Its portfolio primarily generates contracted and regulated cash flows that supports its solid cash distributions. Improving acquired assets and selling these improved assets are also a part of its strategy in creating shareholder value.

BIP aims for annualized total returns of 12-15% on its investments. In other words, investors buying the undervalued stock now may be able to achieve long-term returns that are at the higher end of the range.

The post 2 Smart Stocks to Buy and Hold for Years appeared first on The Motley Fool Canada.

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More reading

• 3 TSX Stocks With Years of Consecutive Dividend Growth
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• 3 Top Dividend Stocks I Can’t Wait to Buy in 2023
• 3 of the Safest Dividend Stocks in Canada

Fool contributor Kay Ng has positions in Brookfield Infrastructure Partners and TELUS. The Motley Fool recommends Brookfield Infrastructure Partners, TELUS, and Telus International. The Motley Fool has a disclosure policy.