The Canadian government launched the Canada Emergency Response Benefit (CERB) to provide financial support to millions of Canadians impacted by the COVID-19 pandemic. The dreaded virus has led to a drastic spike in Canada’s unemployment rate that now stands at 13.7%, up from 6% in February.
According to a CTV News report, the federal government has spent $43.5 million in CERB payouts. The Canada Revenue Agency (CRA) has disbursed this benefit to 8.4 million Canadians as of June 4.
The CERB payout is $2,000 for a four-week period that can be extended up to 16 weeks. In order to be eligible for this payout, you need to be a Canadian resident above the age of 15. CERB applicants need to have earned at least $5,000 in 2019 or in the 12-months prior to the date of application. You also should have not quit your job voluntarily.
Canadians need to be aware that the CERB is a taxable benefit. The CRA is not withholding any tax at disbursal. So, recipients need to calculate their tax rate based on the total income for 2020.
You can take a look at this example to calculate the tax on your CERB payouts. In case, you earn $58,000 in 2020, which includes CERB payments of $8,000, total taxes will be $12,693.24. This estimate is without taking any deductions such as the RRSP into consideration.
The CERB is set to expire for millions of Canadians
The CERB will expire for several Canadians by the first week of July as the 16-week period comes to an end. While the Government of Canada has stated it will continue to support residents impacted due to the COVID-19, it did not confirm whether or not the CERB will be extended.
If we take the above figure of 8.4 million as a constant, the CRA will disburse approximately $17 billion every month in CERB payments. The CTV news report also states that 1.2 million Canadians have stopped applying for CERB, which means they have either rejoined the workforce or are generating income via the Canada Emergency Wage Subsidy program.
The CERB will run till October 3, but as mentioned the 16-week deadline will impact several residents who started these payouts back in April.
Invest in dividend-paying stocks such as Enbridge to ensure passive income
The recent uncertainty has opened our eyes and shown us how vulnerable the global economy is. You can’t just depend on your employment income: you need to invest prudently and generate a passive income stream.
Dividend-paying stocks such as Enbridge (TSX:ENB)(NYSE:ENB) are an ideal bet for the income investor. The ongoing weakness in equity markets has dragged Enbridge stock lower in 2020. Enbridge’s stock price is trading at $42.1 on the TSX which is 25% below its 52-week high.
Enbridge stock has a forward yield of 7.92%. This means a $100,000 investment in this stock will generate close to $8,000 in annual dividends.
Enbridge is the largest energy infrastructure company in North America. It has a massive portfolio of pipeline assets, operates a natural gas utility business, and is increasing presence in the growing renewable energy space.
Enbridge is a low-risk investment given the company’s stable cash flow and fee-based business model. The energy giant generates over 90% of EBITDA from fee-based contracts making it immune to commodity prices.
It’s is one of the few oil companies to increase dividend payouts at a time when prices are at multi-year lows, and has in fact increased dividend payments for 25 consecutive years.
Enbridge has a strong balance sheet and its payout ratio in 2020 is expected to be below 50%. A dividend cut is unlikely and if oil prices recover, this stock will gain significant momentum and investors can then benefit from capital appreciation too.
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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 Enbridge. Fool contributor Aditya Raghunath has no position in any of the stocks mentioned.