Find Safe Dividend Stocks for your Portfolio

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Dividend Earner

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Finding safe dividend stocks is sort of a conundrum … The stock market by definition is not safe. It’s the riskiest investment vehicle which implies that finding a safe dividend stock is a challenging feat to start with.

Dividend safety ratings is also requiring investors to look at the company from a quantitative and qualitative perspective. No company can guarantee a dividend but what successful investors like Warren Buffett say is to focus on high quality businesses with a dominant lead in the business.

Along the quantitative perspective, even if the dividend is considered safe by any metrics but the stock goes down or stays flat, the investor is also disappointed. So it’s not just about a safe payout ratio in the end.

The next challenge is that many investors are looking for a safe high-yield dividend stock and in the investment world, safe and high-yield cannot easily co-exist. So what is a safe dividend stock?

A safe dividend stock is a company that can safely cover the dividend regardless of the economic environment we are in. The safest dividend stocks would also provide dividend growth along with a tollbooth-like business which means cash is continuously flowing. 

Here is what a safe dividend growth looks like from TD Bank. What you see below is dividend growth and stock appreciation. A win-win situation. The next figure shows a growing dividend with a stable yield and payout ratio also highlighting a strong dividend triangle for safety.

TD Bank historical dividend
TD Dividend Metrics - Safe Dividend Stocks
Dividend Adjusted Chart by Stock Rover - Try it out.

The lists below match the most stringent of all requirements:

  • 10 years of consecutive dividend growth
  • 10% annual dividend growth
  • Tollbooth-like business for guaranteed ongoing cash-flow

Note that there can always be a situation where the dividend could be impacted. There is no such thing as guaranteed dividend with the stock market.

Another note is that energy pipeline are currently safe but probably the most at risk from the safe lists below.

Safest Canadian Dividend Stocks

Safe Canadian Dividend Stock

The stringent requirements for safe dividend stocks are making the picking thin so I have put together a safe dividend stock list lowering the requirement.

Safest US Dividend Stocks