The Motley Fool

ALERT: CMHC Sees Home Prices Dropping up to 18%. You Must Do This!

We’re still experiencing the effects of COVID-19 on the economy. It has caused business closures, mass layoffs, and a lower level of immigration. All of these factors are going to weigh on the Canadian housing market.

Specifically, CMHC predicts housing prices dropping 9-18% over the next 12 months. It’s already seeing roughly 12% of mortgage holders deferring payments. And that percentage could climb to as high as 20% by September.

These people are deferring their mortgage payments because they’re financially troubled. They might have lost their jobs due to COVID-19. However, the $2,000-per-month CERB payment can only cover the costs of certain things, and it can only last for so long.

Mortgage deferrals are up to six months. What happens when the time for these deferrals runs out? What if these people don’t have a job to go back to by then?

At a time like this, it’d be tremendously helpful to have other sources of income other than getting what’s earned from one’s job.

Turn your savings into a cash cow

If you have some serious savings, you can turn it into a cash cow right now. COVID-19 has dragged down stocks of certain industries, making them more attractive for long-term investment.

Importantly, you can start getting passive income from them to help with your mortgage payments. Alternatively, if you’re renting or saving for a downpayment, you can also invest to make your money work for you.

During this COVID-19 period, you can take advantage of the market volatility and use any dips to average into Toronto-Dominion Bank, Canadian Utilities, and Brookfield Property Partners, for example.

At writing, they offer nice dividend yields of about 5.1%, 5.3%, and 11.1%, respectively. Buying the same amount in each stock will give you an average yield of just over 7.1%.

Investing $100,000 (roughly $33,333 in each stock) will make you a passive income of more than $7,100 annually (or nearly $592 per month).

When to buy the dividend stocks

TD stock just appreciated more than 21% from a bottom in March. The bleak economy will hit its earnings hard this year. Therefore, it can pull the stock down and lift the bank stock’s yield to close to 6% again. So, look for a dip in TD stock, over the next six months, for a better bargain.

The scenario is similar for Canadian Utilities. It’s expected to experience reduced earnings this year. The stock climbed 17% from a low. So, if you like the stock, look for an entry point below $30 per share.

Of the three dividend stocks, COVID-19 impacts Brookfield Property the most, because the real estate company has more than 41% of its assets in retail properties. The stock rallied more than 70% from its low but still trades at a discount of about 58% from its book value.

The company has the liquidity to maintain its high yield — should the management choose to do so.

The Foolish takeaway

Don’t rely on your paycheque as your only source of income. Develop other sources of income to build wealth and help you pay the bills. Simply start building a passive-income stream via dividend stocks like TD Bank, Canadian Utilities, and Brookfield Property.

Consider buying them on dips, as they had strong rallies recently, while there is still lots of trouble in the economy, including COVID-19 and high debt levels.

Bargain stocks are up for grabs!

Just Released! 5 Stocks Under $49 (FREE REPORT)

Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $49 a share.
Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune.
Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.

Claim your FREE 5-stock report now!

Fool contributor Kay Ng owns shares of Brookfield Property Partners and The Toronto-Dominion Bank. The Motley Fool recommends Brookfield Property Partners LP.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.

I consent to receiving information from The Motley Fool via email, direct mail, and occasional special offer phone calls. I understand I can unsubscribe from these updates at any time. Please read the Privacy Statement and Terms of Service for more information.