For a Shot at $6,000 in Yearly Passive Income, Buy These 2 TSX Stocks

dividends grow over time

Canadian investors can benefit from getting juicy passive income from high-yield dividend stocks. The income from these eligible dividends are taxed at lower rates than your ordinary income if the shares are held in your non-registered account.

Thanks to the stock market dip of approximately 6.5% in the last couple of weeks, you can now look into these blue-chip stocks for higher dividend income.

Bank of Nova Scotia

North American bank stocks have been weighed down due to the failure of three U.S. regional banks this year with the most notable and largest one (so far) being Silicon Valley Bank. Altogether, they had total assets of about US$331 billion at the time of failure. The fear is that this could trigger a ripple effect across the North American and even the global financial system. That is the worst-case scenario. The fact is, regulators have swooped in quickly to seize Silicon Valley Bank’s assets that totaled about US$209 billion at the time of failure.

Bank of Nova Scotia (TSX:BNS), in particular, tends to offer the highest dividend yield among its large Canadian bank peers. The international bank has paid dividends every year since 1833. Its payout ratio is estimated to be about 54% of earnings this year as the bank expects an earnings decline of about 10%.

In a higher interest rate and potential recessionary environment, the regulators could step in to prevent the big Canadian bank stocks from raising their dividends and buying back their shares.

At $64.83 per share at writing, BNS stock offers a juicy yield of 6.4%. Its earnings and payout ratio have the buffer to protect its dividend, even though its payout ratio will probably be a little higher than usual this year.

TC Energy

TC Energy (TSX:TRP) stock is trading at the low end of its range since the pandemic. Multiple factors are at play in weighing on the stock. First, higher interest rates have made fixed-income vehicles better competitors (versus dividend stocks) as income investments. Second, the company had major cost overruns at its Coastal GasLink project, which was made worse by higher inflation.

However, the dividend stock chugged along and continued its dividend-growth streak last month. It raised its dividend by 3.3%. The selloff of 31% of the stock from its 2022 and all-time high makes it a value stock for passive income. At $51.31 per share at writing, TC Energy yields close to 7.3%.

How to make $6,000 in passive income per year

Investors can consider parking some of their long-term capital in blue-chip, high-yield stocks like BNS and TRP for passive income. When the central banks reduce interest rates in North America, it could stimulate the economy and would likely trigger price appreciation in these undervalued stocks.

To make $6,000 in passive income per year from each stock, buy the respective number of shares shown in the table below. If you want to make $3,000 in passive income annually from each, divide the number of shares by two.

COMPANY RECENT PRICE NUMBER OF SHARES DIVIDEND TOTAL PAYOUT FREQUENCY
BNS $64.83 1,456 $1.03 $6,000 4
TRP $51.31 6,452 $0.93 $6,000 4

Investors would be happy to hear that these two stocks are more likely to increase their dividends over time, which means more passive income for them!

The post For a Shot at $6,000 in Yearly Passive Income, Buy These 2 TSX Stocks appeared first on The Motley Fool Canada.

Free Dividend Stock Pick: 7.9% Yield and Monthly Payments

Canada’s inflation rate has skyrocketed to 6.9%, meaning you’re effectively losing money by investing in a GIC, or worse, leaving your money in a so-called “high interest” savings account.

That’s why we’re alerting investors to a high-yield Canadian dividend stock that looks ridiculously cheap right now. Not only does it yield a whopping 7.9%, but it pays monthly!

Here’s the best part: We’re giving this dividend pick away for FREE today.

Claim your free dividend stock pick
* Percentages as of 11/29/22

More reading

  • Buy This ‘Big 5’ Canadian Bank to Sidestep the U.S. Banking Mess [PREMIUM PICK]
  • How to Earn $500 in Tax-Free Monthly Passive Income
  • 2 Unjustifiably Cheap Dividend Stocks in Canada
  • 3 TSX Dividend Stocks With Lucrative Yields in March 2023
  • Got $1,000? 3 Cheap Stocks to Buy Right Now

Fool contributor Kay Ng has positions in Bank Of Nova Scotia. The Motley Fool recommends Bank Of Nova Scotia. The Motley Fool has a disclosure policy.

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