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Retirees: How to Create a Passive Income Machine

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Companies that pay reliable dividends can be an investor’s best friend. With a few choice selections from Canada’s finest high-yield stocks, you can create a system that consistently pays you a relatively worry-free passive income for the rest of your life.

Don’t listen to the naysayers about dividends

Unfortunately, dividend stocks often get a bad rap in the world of investing.

Naysayers argue that investing in companies that pay dividends is less appealing than other stocks because the company decides when and how much you get paid.

With a non-dividend paying investment, however, you can sell shares anytime to create income, allowing you to decide when and how much to sell.

These killjoys also point out that a stock’s value will always drop when it transfers cash from itself to its owners in the form of dividends.

While these arguments are valid, investing in dividend stocks has proven to be a great way to build your own passive income machine.

If you don’t need the income right away, enroll in the dividend reinvestment plan (DRIP). This program allows you to reinvest cash dividends into additional shares of the stock on the dividend payment date.

This practice is beneficial in that if the stock price has declined, you can buy more shares, which adds up to more income when you eventually start collecting cash from the dividends.

While the TSX offers many great dividend stocks to choose from, here are two to consider.


Emera Incorporated (TSX:EMA) has increased its dividend at a compound annual growth rate of 6% since 2000. With a current yield of 4.5%, the company expects to grow the dividend by at least 4% to 5% through 2022.

Emera, an energy and services company headquartered in Halifax, Nova Scotia, maintains $32 billion in assets. With annual revenues of more than $6.5 billion, the company’s electricity and gas generation, transmission, and distribution services are located throughout Canada, the U.S., and the Caribbean.

In addition to its robust dividend, the company has consistently rewarded long-term shareholders. The stock has outperformed both the TSX and the TSX utilities index in the past three-, five-, 10-, and 20-year periods, with its 20-year annual returns hovering around 11.5%. Emera’s stock has soared 27% year to date.

Rogers Sugar

Deeply rooted in Canada for over a century, Rogers Sugar Inc. (TSX:RSI) is the largest refined sugar distributor in the country. The company currently pays a whopping dividend of 7.91%.

Rogers brings in annual revenue of approximately $800 million. In the company’s most recent fourth-quarter results, Rogers reported a decline in adjusted EBITDA of $22.2 million versus $26.3 million for the same period last year.

Although sugar volume has increased for the past five years, sales in the maple syrup business did not meet expectations. The company recently added maple syrup products to its offerings through the acquisition of L.B. Maple Treat Corporation.

During the quarter, Rogers was forced to take a goodwill impairment of $50 million for the maple product segment, which was due in part to recent changes in the competitive environment and lower growth expectations.

However, the subsequent decline in the stock price after the earnings release, gives investors an opportunity to buy the stock on sale. The stock is trading at $4.70 as of writing, down from $6.15 in August.

The bottom line

We’re fortunate to have many superb choices for Canadian dividend stocks. When selecting stocks, look for companies that have a long history of dividend payments, a strong track record of dividend increases, and operate in a stable business sector.

If possible, enroll in the DRIP to automatically increase the number of shares you own, so that when you eventually start taking income from the investments, your passive income machine will generate even more money.

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Fool contributor Cindy Dye has no position in any of the stocks mentioned.

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