Generating passive income has never been more important than it is now. In today’s economy and amid all the taxes and other expenses, having more than one revenue stream is essential to Canadians. More income besides the money you get from your job or business will offer financial stability, help you get closer to your financial freedom goals faster, and offset the impact of inflation.
There are several ways to generate a passive income as a Canadian, but high-yielding dividend stocks are particularly attractive, especially for long-term capital appreciation. To this end, I will show how a hypothetical $20,000 split evenly across four TSX dividend stocks can generate an additional $1,000 per year in tax-free dividend income.
Bank of Nova Scotia
Bank of Nova Scotia (TSX:BNS) is one of Canada’s oldest and largest financial institutions, and it has been a reliable dividend-paying stock for around two centuries. Scotiabank started paying its investors their dividends in 1833 and has never failed to complete a quarterly payment to investors since then. Its diversified operations worldwide generate the kind of cash flow necessary to support consistent payments and dividend growth.
Scotiabank has been expanding its focus in the North American markets to grow shareholder value while streamlining its exposure to the higher-growth but riskier Latin American markets. As of this writing, Scotiabank stock trades for $123.49 per share and pays $1.14 per share each quarter, translating to a 6.1% dividend yield that is too attractive to ignore.
Enbridge
Enbridge Inc. (TSX:ENB) is another long-term holding perfect for many dividend-focused investors. The $165.8 billion market capitalization integrated pipeline and energy company plays a vital role in the North American economy. Its extensive pipeline network transports roughly a fifth of the crude produced and consumed in North America. Enbridge also has one of the largest utility businesses in the region under its belt, alongside growing renewable energy operations.
Backed by solid fundamentals and around 80% of its earnings protected against inflation through inflation-index mechanisms, this TSX dividend stock has increased payouts for 31 consecutive years. As of this writing, it trades for $75.91 per share and pays $0.97 per share each quarter, translating to a 5.1% annualized dividend yield.
SmartCentres REIT
SmartCentres REIT (TSX:SRU.UN) is a Real Estate Investment Trust (REIT) that offers monthly returns, which can make it an attractive investment for income-focused Canadians. SmartCentres owns and operates a portfolio of roughly 200 properties located across key areas across Canada, anchored by strong tenants. Boasting high occupancy and rent collection rates, its stability allows the trust to deliver attractive and consistent monthly distributions to unit holders.
As of this writing, it trades for $30.39 per share and pays investors $0.15 per share each month, translating to a roughly 6% annualized dividend yield that you can lock into your portfolio today.
Peyto Exploration & Development
Peyto Exploration & Development Corp. (TSX:PEY) is another monthly dividend stock to consider for income-focused investors. The company engages in the exploration, development, and production of oil and natural gas. The energy company operates predominantly in the Deep Basin in Alberta and has delivered impressive returns to investors over the years.
As of this writing, Peyton stock trades for $23.75 per share and pays investors $0.12 per share each month, translating to a 6.1% annualized dividend yield. Boasting solid long-term growth prospects, this stock can be an excellent investment to consider.
Foolish takeaway
The example below shows how a hypothetical $20,000 split across these four TSX stocks can generate over $1,000 per year in dividend income. However, it’s important to remember that it is just for illustrative purposes. In practice, you should try to achieve similar rates of return by dividing investment capital across a wider range of income-generating assets to offset the risk by diversifying your funds.
