The COVID-19 pandemic brought the entire world to a standstill a few months back. Many countries closed borders and shut businesses to spread the rate of coronavirus infections. This led to lower consumer spending and a massive spike in unemployment rates.
Canada’s unemployment rate touched a multi-year high of 13% in May and is still above the 10% mark. In order to help millions of Canadians, the federal government and the Canada Revenue Agency (CRA) has pumped in billions to revive a sluggish economy.
The CRA introduced the Canada Emergency Response Benefit (CERB) as a retroactive benefit payment in April. The CERB paid eligible Canadians who lost their job amid COVID-19 $500/week or $2,000/month until the end of September.
The CERB was paid to about 8.8 million Canadians who feared they had to dig into their hard-earned savings to pay for expenses at a time when job losses surged towards record highs. However, while the CERB has ended, the CRA has introduced an updated Employment Insurance (EI) program and a brand-new Canada Recovery Benefit (CRB) program to accommodate unemployed Canadians, ensuring a smooth transition.
Will CERB recipients be eligible for the EI and CRB?
In order to be eligible for the EI program, applicants should have been employed for at least 120 insurable hours in the past 52 weeks. This low threshold is retroactive to March 15 of this year, which means anyone who was previously ineligible for EI can now qualify for this federal payout.
CERB recipients would have transitioned towards the revised EI program on September 27 and will receive a maximum benefit of $573 per week for up to a period of 45 weeks.
Alternatively, the CRB provides $500/week for up to 26 weeks for self-employed Canadians who have stopped working or have seen their income cut by at least 50% due to the pandemic. However, applicants should note that the CRA will deduct a 10% tax at the source before disbursing this amount.
The CRB applications will begin on October 12, and recent developments suggest the CRA will pay you $450/week or $1,800/month via this benefit.
Create a passive-income stream for a lifetime
While the CERB, EI, and CRB have helped Canadians and the economy, they are just temporary measures and will end at some point. You need to focus on savings and create a nest egg that will help you generate a steady stream of passive income.
Ideally, you can achieve this goal by creating a portfolio of dividend-paying stocks in a TFSA (Tax-Free Savings Account). A recession-proof stock such as Fortis (TSX:FTS)(NYSE:FTS) is a top bet for income investors.
Fortis is one of the largest utility companies in North America, and the stock is currently trading at $55.6, indicating a dividend yield of 3.6%. The company has raised its dividend payouts every year for close to 50 years and recently announced an increase of $800 million to its five-year capital-investment plan.
Fortis provides essential services that are in demand regardless of the state of the economy. Further, its capital-expansion program will help it increase future cash flows, helping Fortis to sustain and increase dividend payouts.
Fortis generates, distributes, and transmits electricity to retail customers in the U.S., Canada, and the Caribbean. This means 99% of the company’s revenues are regulated, and it aims to increase dividends at an annual rate of 6.5% through 2024.
A $25,000 investment in Fortis will help you generate $900 in annual dividend payments. This payout will increase to $1,170 at the end of 2024, according to the company’s dividend-growth plan, increasing your effective yield to 4.7%.
