Passive Income: 2 Prudent Canadian Stocks With Yields Over 7%

Enbridge (TSX:ENB)(NYSE:ENB) and Inovalis REIT (TSX:INO.UN) are some of the more prudent Canadian passive income stocks out there.

| More on:
energy industry

Image source: Getty Images

The broader markets have mostly moved on from the coronavirus stock market crash, but many passive income investments are still off considerably from their pre-pandemic highs. And that’s despite the brighter forward-looking trajectory, with more vaccine jabs being administered by the day.

Some passive income investments out there still sport dividend (or distribution) yields that are still on the higher end of the historical range. And as outlooks look to improve, so too does the security of their payouts.

Without further ado, let’s have a closer look at two top names with relatively safe yields of at least 7%. Consider Enbridge (TSX:ENB)(NYSE:ENB) and Inovalis REIT (TSX:INO.UN), which sport yields of 7.2% and 8.4%, respectively.

Enbridge: A pipeline king running through hurdles

Enbridge is a pipeline kingpin and former dividend darling that’s been under pressure for years now. Regulatory roadblocks, political pressures, and other high hurdles keep popping up, adding to the volatility in a choppy high-beta stock that’s already pretty tough to stomach for many older passive income investors.

The dispute with Michigan over its Line 5 pipeline is the latest source of stress for investors. As expected, Enbridge is defying orders and is continuing to operate as planned. Investors have mostly shrugged off the dispute, with the stock holding its own in the days leading up to and past the deadline put forth by U.S. regulators.

Political pressures have become the norm for Enbridge shareholders. The stock has already taken an uppercut to the chin, and the dividend yield has swollen in accordance. Despite the regulatory overhangs, Enbridge still seems very confident with its forward-looking outlook. At least confident enough to keep the dividend hikes coming for investors.

Although the rally off those November 2020 lows is losing steam, I’d still look to average into a position over time, as Enbridge is a great name that can fuel any prudent passive income portfolio. The payout may be stretched, and there will always be regulatory and political risks, but I think they’re baked in. Such pressures like those put forth by Michigan will probably not be as great a source of volatility with Enbridge stock trading at these depths.

Inovalis REIT: A big passive income 

Inovalis REIT is one of my favourite passive income investments, not just because it tends to command a yield well north of the 8% mark, but also because it’s a great outlet to bet on the French and German office markets. The REIT may seem like a value trap with a siren song of distribution, but it’s really not. Rather, it’s one of few REITs that has a ridiculously high yield by design. The distribution is pretty well supported by funds from operations (FFOs) and is a prudent buy for those bullish on European office real estate.

There is a catch, though. Inovalis doesn’t tend to reward its long-term shareholders with much in the way of capital gains. Unless you load up on the name during a market-wide meltdown, you probably won’t get much in the way of volatility.

Last year, when shares fell off a cliff, I urged investors to load up, as the sell-off was overblown, allowing investors a brief opportunity to lock in a high double-digit yield alongside quick and outsized capital gains. The REIT is just a few percentage points away from its high, and the yield is back to normalized levels, so the “steal” of a deal is gone. Still, if passive income is what you seek, I’m not against initiating a position at $9 and change.

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 Joey Frenette has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Enbridge. The Motley Fool recommends Inovalis REIT.

More on Dividend Stocks

Two seniors float in a pool.
Dividend Stocks

TFSA: How to Earn $1,890 in Annual Tax-Free Income

Plunk these investments into your TFSA to earn passive income and avoid the taxman.

Read more »

Engineers walk through a facility.
Dividend Stocks

1 TSX Stock I Wouldn’t Touch With a 10-Foot Pole

AtkinsRéalis (TSX:ATRL) is one TSX stock I'd never invest in.

Read more »

edit Woman in skates works on laptop
Dividend Stocks

3 No-Brainer Stocks to Buy Under $30

These three stocks all offer a huge deal for investors looking for dividends, as well as growth that will last.

Read more »

You Should Know This
Dividend Stocks

How to Convert a $300 Monthly Investment Into $338 in Monthly Income

If you want a certain amount in monthly passive income, invest a similar amount today and leave the rest to…

Read more »

Increasing yield
Dividend Stocks

3 Income Stocks With Big Yields to Consider in April 2024

If you haven’t yet made your March investments, here are three income stocks to buy the dip and lock in…

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

RRSP Investors: Don’t Miss Out on This Contribution Hack!

This hack has so many benefits for you -- not just when you put it in your RRSP but for…

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

Passive Income: 2 Safe Dividend Stocks to Own for the Next 10 Years

Dividend stocks such as Manulife and Fortis can help you generate a stable and recurring passive-income stream.

Read more »

Young woman sat at laptop by a window
Dividend Stocks

3 Dividend Stocks Everyone Should Own for the Long Haul

For investors looking for top-tier dividend stocks to buy and hold for the long term, here are three of my…

Read more »