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Retirees: How to Earn at Least $1,275 a Quarter in Passive Income on an Investment of $69,500

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Canadians nearing the age retirement need to look at avenues that can generate a stable stream of recurring income. Investing in stocks that have high dividend yields may enable retirees to ensure recurring cash flows.

The Tax-Free Savings Account (TFSA) has a contribution limit of $69,500 for anyone who has not invested in this account since its introduction in 2009. If you allocate this amount equally to the top three stocks of iShares S&P/TSX Canadian Dividend Aristocrats Index ETF, it can result in quarterly payments of $1,275 or yearly payments of $5,100.

Alaris Royalty

Alaris Royalty (TSX:AD) is the top holding of the ETF and accounts for 2.43% of the fund. The company provides capital to private businesses, and these investments are in the form of preferred limited partnership interests, long-term licence or royalty agreements or preferred interest in limited liability companies in the U.S.

In short, Alaris provides equity capital to steady growth companies. The company has returned an average of 79% in the 13 investments it exited. It increased sales from $89.1 million in 2017 to $100 million in 2018. Analysts expect sales to touch $131 million by the end of 2021.

Alaris is a small-cap company with a market cap of $855 million. It is trading at a market cap to 2019 sales ratio of 7.35. The stock has gained 21.5% in the last 12 months compared to the S&P 500 gains of 23.2%.

However, Alaris stock is still trading at an attractive price-to-earnings multiple of 12.9. Comparatively, analysts expect company earnings to rise by an annual rate of 8% in the next five years, and with a forward dividend yield of a juicy 7.4%, the stock can continue to surge higher if the broader market moves higher.

Inter Pipeline

Inter Pipeline (TSX:IPL) is the second-largest holding of the ETF and accounts for 2.28% of the fund. IPL is a petroleum transportation, storage, and natural gas liquids processing business. It has a bulk liquid storage business in Europe with 23 terminals that provide 37 million barrels of storage capacity.

Due to weakness in the Canadian energy space, the stock has lost 36% in market value. Investors are also concerned over Inter Pipeline’s high debt levels, which stand at $6.45 billion compared to its market cap of $9 billion.

In the last 12 months, shares are up by a measly 4.73%. However, the market value decline since 2015 has meant that IPL’s dividend yield stands at 7.9%.

Fiera Capital

Fiera Capital (TSX:FSZ) is the third-largest holding of the ETF and accounts for 2.28% of the fund. Fiera Capital is a Canada-based investment company. It provides investment advisory and related services in North America.

The company has managed to grow sales from $344 million in 2016 to $540 million in 2018. Analysts expect Fiera to post revenue of $772 million by 2021. Alaris is a small-cap company with a market cap of $1.29 billion. It is trading at a market cap to 2019 sales ratio of two. The stock has gained 4.5% in the last 12 months, despite stellar top-line growth.

Fiera stock is trading at a forward price-to-earnings multiple of 8.6. Comparatively, analysts expect company earnings to rise by an annual rate of 15.3% in the next five years and with a forward dividend yield of 6.67%, the stock can beat broader markets in 2020 and beyond.

The verdict

While the above three companies have solid dividend yields, investors need to analyze the long-term prospects of the firms. Alaris, IPL, and Fiera may underperform if recession fears come true, as they are small-cap companies and have high betas.

Investors can also look to allocate funds in other dividend-yielding stocks to further diversify their portfolios.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

The Motley Fool recommends ALARIS ROYALTY CORP. Fool contributor Aditya Raghunath has no position in any of the stocks mentioned.

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