TFSA Investors: 2 TSX Stocks That Can Generate Annual Dividends of $1,400 on $10,000

Oil prices have touched a 28-year low. Is it time for contrarian investors to consider high dividend-paying stocks in the energy sector?

| More on:

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

The current crisis has offered up great buying opportunities for the smart investor. There are some great stocks available at cheap valuations — stocks that are good dividend payers. The fall in prices means that you can reap the dual benefits of getting a tidy dividend payout when the market is bad. Such stocks might more than double in value once the crisis passes.

Here we look at two Canadian stocks that have a double-digit dividend yield, which is mighty attractive for the income investor.

An integrated energy infrastructure company

Keyera Corp (TSX:KEY) operates an integrated Canadian-based energy infrastructure business with extensive interconnected assets and depth of expertise in delivering energy solutions. The company has fallen from a high on $36.19 on February 21 to less than $10.5 today. That’s a drop of over 70%.

Keyera achieved record results in 2019, delivering net earnings of $444 million compared to $403 million in 2018 and adjusted EBITDA of $944 million compared to $807 million in 2018. Keyera had to field some tough questions because of the drop in its share price in the last three weeks.

Management reiterated that despite the current economic meltdown, its capital program remains on schedule and on budget. During the year, Keyera invested $986 million in growth capital and expects to invest between $700 million and $800 million in 2020, excluding acquisitions.

Keyera expects to complete the second phase of the Wapiti gas plant by mid-2020 and the Wildhorse Terminal in the second half of the year while continuing to progress the KAPS NGL and condensate pipeline system and the Pipestone gas plant.

Capital expenditures in 2021 are expected to decrease to between $400 million and $500 million as the company completes its current growth capital program.

Keyera pays out a dividend of $0.16 per share per month, which works out to $1.92 over 12 months, indicating a yield of 13.06%. This means that for every $10,000 invested today, an investor stands to make $1,306 in dividend payouts alone!

In addition, once the crisis is over, Keyera will most likely hit its previous highs again, and an investor today could be sitting on a bucket load of cash at the end of this bear market.

This energy stock has a dividend yield of 15.2%

Pembina Pipeline Corporation (TSX:PPL)(NYSE:PBA) is another strong stock that has taken a battering of over 65% from its February 21 price of $53.10. This is a great buying opportunity for investors. Pembina President Michael Dilger recently bought a $791,000 worth of stock at a price of $31.62. However, shares have fallen 48% since then.

Pembina is a leading transportation and midstream service provider that has been in business in North America’s energy industry for 65 years. Pembina owns an integrated system of pipelines that transport various hydrocarbon liquids and natural gas products produced primarily in western Canada.

The company reported fourth-quarter earnings of $145 million and record full-year earnings of $1.5 billion for 2019, a 61% decrease and a 17% increase, respectively, over the same periods in the prior year.

Around $1.2 billion of additional fee-based projects are expected to enter service in 2020.  With these new projects coming online, in conjunction with the contribution from the Kinder Acquisition assets, Pembina anticipates generating 2020 adjusted EBITDA of between $3.25 and $3.55 billion.

Thanks to the massive drop in its share price, Pembina’s dividend yield is a mouth-watering 15.22%, which means you will earn $1,522 annually for every $10,000 invested.

This is another stock that will recover very quickly when the markets turn bullish. Pembina has increased dividends for eight consecutive years.

A combined investment of $10,000 allocated equally in the two stocks will result in annual dividend payments of $1,400.

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 owns shares of and recommends Kinder Morgan. The Motley Fool recommends PEMBINA PIPELINE CORPORATION. Fool contributor Aditya Raghunath has no position in any of the stocks mentioned.

More on Dividend Stocks

ETF chart stocks
Dividend Stocks

3 ETFs to Buy Now and Hold for Decades

Holding reliable growth ETFs for decades is one of the most tried and tested ways of building your wealth over…

Read more »

edit Back view of hugging couple standing with real estate agent in front of house for sale
Dividend Stocks

Housing Affordability Is Out of Reach for Many Canadians

The interest rate hikes will cool the real estate market, but the housing affordability crisis would worsen, as homeownership and…

Read more »

Dollar symbol and Canadian flag on keyboard
Dividend Stocks

2 Oversold Great Canadian Dividend Stocks to Buy Now and Own for 20 Years

These top Canadian dividend stocks look oversold right now and continue to raise their payouts.

Read more »

Man holding magnifying glass over a document
Dividend Stocks

3 Value TSX Stocks to Eye in July 2022

Here are a few value TSX stocks to check out in July 2022. They also pay juicy, safe dividend income…

Read more »

analyze data
Dividend Stocks

2 Canadian Stocks at the Top of My Buy List

Here are two of the top Canadian stocks on my buy list, as the market uncertainty continues to plague Canadian…

Read more »

money cash dividends
Dividend Stocks

TFSA Passive Income: 2 Top TSX Dividend Stocks to Buy on the Correction

These top dividend stocks look cheap to buy right now for a TFSA focused on passive income.

Read more »

Target. Stand out from the crowd
Dividend Stocks

2 Oversold TSX Stocks to Buy in July

Invests can now find good value right now in top TSX dividend stocks.

Read more »

Female hand holding piggy bank. Save money and financial investment
Dividend Stocks

2 Great TSX Stocks to Start a TFSA Retirement Fund During a Market Correction

These top TSX dividend stocks look cheap right now to buy for a TFSA retirement portfolio focused on passive income…

Read more »