The COVID-19 pandemic has left thousands of Canadians jobless, with many facing hardships in their businesses. However, the Canada Revenue Agency’s (CRA) Canada Emergency Response Benefit (CERB) program came as big boon for citizens that helped in bridging the income gap.
Further, the recent eight-week CERB extension (from 16-weeks to 24-weeks) by Prime Minister Justin Trudeau came as a big sigh of relief. The CERB benefit of $2,000 for four weeks can now be re-applied for a maximum of six periods, thus bringing the total benefit to $12,000. However, the eligibility criteria remain unchanged.
Beyond CERB, the Canadians can continue getting other cash benefits from the CRA and additional benefits from different Canadian provinces.
However, the CERB benefits would not last long and would eventually end as the government would want its people to look for work as the economic activities pick up the pace. Therefore, instead of depending on CERB and other CRA cash benefits, it’s time to look for a second source of income that continues to grow with you and helps in bridging the income gap at the time of need.
Saving regularly and consistently investing in quality TSX stocks could help in generating a steady passive income for a safe future.
Where to invest?
While there are risks with every investment, relying on dividend-paying stocks adds much-needed stability in a volatile and uncertain environment. Without further ado, here are my top three suggestions that would generate consistent income, diversify your portfolio, and shield it against any market disruption.
Algonquin Power & Utilities
Utility giant Algonquin Power & Utilities (TSX: AQN) is a must-have stock in your portfolio for consistent dividend income. The company has an impressive forward yield of over 4.6%. Its diversified renewable energy business supports strong cash flows, in turn, its payouts.
Meanwhile, its utility business generates predictable cash flows. The company’s earnings are growing at a steady pace, which has supported its dividend hike for 10 years straight.
Investors should note that Algonquin’s dividends have risen at a compound annual growth rate of 10% since 2009. Algonquin should continue to deliver higher returns in the form of dividends in the coming years, thanks to its low-risk and high-growth business, cost reduction strategies, and ability to drive its cash flows.
Toronto-Dominion Bank
Toronto-Dominion Bank (TSX: TD)(NYSE: TD) is another top dividend-paying company offering a quarterly dividend of $0.79 that translates into an annualized yield of 5.1%. The bank has raised its dividends at an annualized rate of 10% over the past 20 years, which is impressive and higher than its peers.
The bank has a large retail and commercial deposits base and has been consistently grown its net income. Its ability to drive loans and deposits bodes well for growth. Though the bank had to halt its dividend hike amid the COVID-19 pandemic temporarily, it is well-positioned to deliver robust earnings growth in the future that should support its higher payouts.
Enbridge
Enbridge (TSX: ENB)(NYSE: ENB) is a safe bet for investors looking for passive income that grows with them. The pipeline company is a Dividend Aristocrat and offers a juicy dividend yield of 7.8%. Investors should note that Enbridge generates strong cash flows and has a low-risk business model, which should support its long-term growth.
Though the lower mainline volumes and an uncertain outlook for crude oil remain a drag in the near term, its resilient businesses like gas transmission and renewable power continue to support its cash flows.
Enbridge’s mainline volumes should recover in the second half of 2020 with the increase in economic activities and should further drive its EBITDA and cash flows, in turn, its dividends.
