Live on Passive Income: 3 Top TSX Dividend Stocks to Buy in October 2020

Want to generate strong passive income? Rely on these dividend-paying TSX stocks.

Ever wondered about living on an income stream which doesn’t require your active engagement? It is achievable if you invest your money wisely and let it work for you.

While there are multiple ways to achieve financial freedom like through rental income or a royalty from a book, I will restrict myself to dividend-paying stocks. There are a few TSX-listed dividend-paying stocks that offer stellar dividends that are likely to grow with you and generate robust passive income.

Pembina Pipeline

With a monthly dividend payout of $0.21 and a high yield of 8.8%, Pembina Pipeline (TSX:PPL)(NYSE:PBA) is among the top stocks to generate a strong passive income. For instance, an investment of $50,000 in Pembina Pipeline stock can generate a monthly income of about $364, or an annual dividend income of about $4,366.

While lower demand for crude weighed on its stock, investors should note that Pembina Pipeline’s business is diversified across multiple commodities and generates strong fee-based cash flows. Further, its business is highly contracted and has arrangements to lower volume and price risk.

The company generates strong fee-based cash flows and has managed to lower its target payout ratio (as a percentage of fee-based cash flows), which implies that its future payouts are safe. Pembina has a long history of consistently paying dividends and has paid $4.5 billion in the form of dividends in the last five years. During the same period, its dividends have increased by 6.5% annually.

While weak energy demand remains a drag in the near term, its resilient and diversified business and strong fee-based cash flows should help Pembina to announce dividends that could continue to grow with you.

Bank of Nova Scotia

While lower interest rates and an uncertain economic outlook might make bank stocks unattractive, you should keep Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) on your radar to generate strong passive income. The bank pays a quarterly dividend of $0.90, which translates into an annual yield of 6.4%.

Bank of Nova Scotia has consistently paid dividends, and over the last 10 years, its dividends marked a compound annual growth (CAGR) of 6%, thanks to the CAGR of 8% in its adjusted EPS. An investment of $50,000 in Bank of Nova Scotia could fetch you an annual dividend income of about $3,240.

As economic activities pick up the pace, Bank of Nova Scotia is likely to generate strong net income that is likely to support its payouts. Further, the provisions for credit losses are likely to go down in the coming quarters, which is encouraging. The bank’s exposure to high-growth markets and ability to grow its net income suggests that investors could expect dividend hikes in the future years.

Enbridge

The energy infrastructure giant Enbridge (TSX:ENB)(NYSE:ENB) has boosted its shareholders’ returns by consistently paying dividends since it listed on the exchange in 1953. Last year, it paid $6 billion in dividends, which represented year-over-year growth of 28%.

Investors should note that Enbridge’s dividends have grown at a CAGR of about 11% over the last two-and-a-half decades. Moreover, with its quarterly payout of $0.81, a $50,000 investment in Enbridge stock could generate an annual income of about $4,177.

Enbridge’s payouts are safe, thanks to the strong distributable cash flows, and its dividends are likely to continue to increase in the coming years.

Bottom line

Investors should note that all these stocks are trading cheap as the pandemic weighed on the demand. However, with economic activities gaining pace, investors should lap up these stocks for your passive-income portfolio while they are still down.

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.

Fool contributor Sneha Nahata has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Enbridge. The Motley Fool recommends BANK OF NOVA SCOTIA and PEMBINA PIPELINE CORPORATION.

More on Energy Stocks

engineer at wind farm
Energy Stocks

1 Canadian Utility Stock to Buy for Big Total Returns

Let's dive into why Fortis (TSX:FTS) remains a top utility stock long-term investors may want to consider right now.

Read more »

Canadian dollars in a magnifying glass
Energy Stocks

The Smartest Energy Stocks to Buy With $200 Right Now

The market is full of great growth and income stocks. Here's a look at two of the smartest energy stocks…

Read more »

Top TSX Stocks

A 6 Percent Dividend Yield Today! But Here’s Why I’m Buying This TSX Stock for the Long Term

Want a great stock to buy? You will regret not buying this TSX stock and its decades of growth and…

Read more »

ways to boost income
Energy Stocks

Act Fast: These 2 Canadian Energy Stocks Are Must-Buys Before Year-End

Here are two high-potential Canadian energy stocks with stable dividends you can consider adding to your portfolio before the year…

Read more »

canadian energy oil
Energy Stocks

2 No-Brainer Energy Stocks to Buy With $1,000 Right Now

If you have $1,000 to invest right now, CES Energy Solutions (TSX:CEU) and Enerflex (TSX:EFX) are no-brainer options.

Read more »

The letters AI glowing on a circuit board processor.
Energy Stocks

Maximizing Returns: How Canadian Investors Can Profit From AI’s Growing Energy Needs

Renewable energy stocks like Brookfield Renewable Partners (TSX:RNW) profit from AI's extreme energy usage.

Read more »

oil pump jack under night sky
Energy Stocks

3 No-Brainer Oil Stocks to Buy With $1,000 Right Now

The current geopolitical situation may not be conducive to oil price gains, but there are also positive catalysts.

Read more »

oil and natural gas
Energy Stocks

Best Stock to Buy Now: Suncor vs Cenovus?

Comparing Canada's energy giants: While Suncor stock dominated 2024, Cenovus could be a more compelling choice for 2025 with stronger…

Read more »