Yesterday, Canadian prime minister Justin Trudeau announced the extension of the Canada Emergency Response Benefit (CERB). This benefit now provides residents with a payout of $500/week for a period of 24 weeks, up from the earlier timeline of 16 weeks. It means the Canada Revenue Agency (CRA) will now pay eligible applicants a maximum of $12,000 for the 24-week period.
While Canadians are returning to work, millions of people have been impacted by the COVID-19 pandemic. Canada’s unemployment rate stands at 13.7%, and over 8.4 million Canadians have now applied for the CERB.
Trudeau commented, “We know that many Canadians across the country are still facing a really tough time due to the COVID-19 pandemic, and we will continue to take action to better support them. By extending the Canada Emergency Response Benefit, Canadians will be able to continue to buy groceries and pay their bills as we work together to safely and effectively restart the economy.”
The CERB was introduced by the Government of Canada to provide financial relief to employed and self-employed individuals impacted by the coronavirus. The CERB can be availed by workers who
- Live in Canada and are over the age of 15;
- Have stopped working due to COVID-19;
- Had employment or self-employment income of at least $5,000 in 2019 or in the 12 months prior to the date of application;
- Have not earned over $1,000 in employment or self-employment income per benefit period while collecting the CERB payout; and
- Have not quit their jobs voluntarily.
Applicants should know that the CERB is a taxable benefit. You need to add this payout to your total income for 2020 and calculate the tax owed to the CRA when filing taxes for 2021.
Invest your CERB in this dividend stock
In case you are fortunate to have enough savings and can invest your CERB payouts, dividend stocks remain an attractive bet right now. Energy heavyweight Pembina Pipeline (TSX:PPL)(NYSE:PBA) has a juicy forward yield of 7.2%. The Pembina Pipeline stock is trading on the TSX at $35.26, which is 34% below its 52-week high.
At a time when energy companies have been decimated due to falling oil prices, this Canada-based midstream giant has increased dividends by 5% in Q1. If you invest your entire CERB payout of $12,000 to buy 340 Pembina shares, you can generate annual dividend payments of over $850.
Pembina pays a monthly dividend of $0.21 per share, which means you can generate $71.4 in monthly dividend payments. Pembina started paying dividends back in 1997. It has increased these payouts at an annual rate of 5% in the last nine years.
There is no reason why it cannot continue to increase these payouts in 2020 and beyond. Pembina has a strong balance sheet. It generates 90% of earnings from fee-based contracts, making it almost immune to commodity prices.
Further, 80% of Pembina contracts are with investment-grade counter-parties. The company’s payout ratio stands at 60%, which means it has enough room to increase dividends, and provides Pembina the flexibility to boost capital expenditures and expand the top line.
Pembina Pipeline is a top income stock. While its high dividend yield is attractive, long-term investors will also benefit from capital appreciation once oil prices move higher. Pembina stock has already gained 131% since bottoming out in March 2020.
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 PEMBINA PIPELINE CORPORATION. Fool contributor Aditya Raghunath has no position in any of the stocks mentioned.