Canada Revenue Agency: Complement CERB With Big Dividend Income

Here’s how you can make big dividend income right now to complement the CERB money.

Kay Ng

Author Bio Kay graduated from the University of British Columbia with a Bachelor of Science in Computer Science and furthered her studies in financial markets, finance, and financial accounting. She began investing in dividend stocks in 2008, turning an early interest into a lasting passion. Over the years, Kay has refined her investment approach to focus on high-quality businesses, using fundamental analysis and valuation to identify long-term investment opportunities. Her investment research and articles have been featured in The Motley Fool, Sure Dividend, and Seeking Alpha. Outside of investing, Kay enjoys playing the piano, from popular songs learned by ear to challenging classical compositions. Her favourites include Fantaisie-Impromptu by Frédéric Chopin and La Campanella by Franz Liszt. Education Bachelor of Science (BSc) in Computer Science, University of British Columbia Further studies in financial markets, finance, and financial accounting Areas of Expertise Dividend stocks, fundamental analysis, company valuation, quality investing, long-term investing, business fundamentals, and identifying investment opportunities in high-quality companies. Social Media Profiles LinkedIn Favorite Investment Quotes “The best way to measure your investing success is not by whether you’re beating the market but by whether you’ve put in place a financial plan and a behavioral discipline that are likely to get you where you want to go.” — Benjamin Graham “A market downturn doesn’t bother us. It is an opportunity to increase our ownership of great companies with great management at good prices.” — Warren Buffett

Published August 5, 2020 7:45 am EDT

The Canada Revenue Agency’s Canada Emergency Response Benefit (CERB) of $2,000 a month is tremendously helpful in today’s crisis. You can also complement the CERB money with big dividend income to boost your overall income.

Here are a couple of big dividend stocks that you can consider buying to increase your income immediately.

Capital Power

Capital Power (TSX: CPX) is a Canadian Dividend Aristocrat that just increased its dividend this quarter. The hike marks its seventh consecutive year of dividend growth.

The utility stock’s new quarterly dividend is $0.5125 per share or an annualized payout of $2.05 per share. Capital Power stock is still good for a yield of 6.85%, despite it having appreciated about 11% since late July, as the company continues to perform.

Another piece of good news that contributed to the pop was yesterday’s announcement of a 10-year extension to a tolling agreement for its natural gas facility in Alabama that sells capacity and energy to an A-rated credit rating entity in the Decatur region. This will result in higher adjusted EBITDA for the first three years of the extension.

Because Capital Power is a relatively small utility with a market cap of $3.1 billion and an enterprise value of about $7 billion, any incremental cash flow makes a big impact.

Analysts have a 12-month average price target of $33.50 per share on Capital Power, which represents near-term upside potential of 12%. So, the income stock remains reasonably valued for purchasing.

The stock seems to be on the verge of breaking out. If it stays above $30 over the next week or so, there’s a good chance it would head to the $33 level over the next six to 12 months. If the utility continues to execute, it can reach the $40 level in a couple of years!

Of course, dividend increases will also follow. Management aims for an increase of 7% in 2021 and 5% in 2022.

Brookfield Property Partners

Analysts think Brookfield Property Partners (TSX: BPY.UN)(NASDAQ:BPY) has a base price of US$12 per unit. That’s not surprising given that recently, the company offered to buy back US$890 million worth of shares from unitholders at that exact price.

Seeing that the company has a track record of long-term double-digit returns and employs a value-investing approach in quality assets, it’s more likely that the units are worth much more.

Analysts have an average 12-month price target of US$15.20 on BPY, which represents near-term upside of 31%.

At US$11.56 per share, BPY provides a mouth-watering yield of 11.5%. The high-yield stock is currently weighed down by the COVID-19 disruption across its retail properties, which are largely class A malls.

In a normal market, these malls are populated with higher-end tenants and consequently have lower vacancy rates and industry-leading rents.

Unfortunately, we’re in a recession. But BPY has a strong financial position and the liquidity to weather the downturn.

Investors with an investment horizon of three to five years should generate outsized returns while collecting a big passive income, assuming the economy normalizes.