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

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

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

Canadian stocks are rising
Dividend Stocks

3 Ways to Invest in Canadian Real Estate Under $20

Real estate can be a great way to make passive income, but you certainly don't have to invest a lot…

Read more »

grow dividends
Dividend Stocks

TFSA Wealth: 2 Oversold Canadian Stocks for a Retirement Fund

These top TSX divided stocks look attractive today for TFSA investors.

Read more »

A close up image of Canadian $20 Dollar bills
Dividend Stocks

Create $1,487 in Passive Income From a Top TSX Dividend and Growth Stock

This top growth stock on the TSX today could bring in almost $1,500 in passive income and triple your investment…

Read more »

Human Hand Placing A Coin On Increasing Coin Stacks In Front Of House
Dividend Stocks

Renters Will Rise in Number vs. Homebuyers in 2022

The greater majority of Canadian renters doubts their ability to purchase a home in 2022 due to surging inflation and…

Read more »

Man holding magnifying glass over a document
Dividend Stocks

West Fraser Stock: A Sneaky Growth Stock No One Talks About

West Fraser (TSX:WFG)(NYSE:WFG) stock has been a sneaky growth stock when it comes to its dividend.

Read more »

Dividend Stocks

Inflation Investing: 2 Top TSX Dividend Stocks to Buy Now

TFSA income investors can get dividend yields of better than 6% to help offset the impacts of high inflation.

Read more »

Canadian Dollars
Dividend Stocks

Got $1,000? Invest it in Real Estate

If you've got an extra $1,000, you should check out cheap REITs like Allied Properties (TSX:AP.UN) for juicy income.

Read more »

Community homes
Dividend Stocks

Real Estate: 2 Top Dividend Aristocrats to Own Today

The recent correction in the real estate sector has made several real estate stocks like these two attractive to income-seeking…

Read more »