The moment that you knew was coming has finally come. The Canada Revenue Agency (CRA) has cut the $500/week Canada Recovery Benefit (CRB) to $300 effective July 18. This reduced CRB will be available till September 25, 2021, until a further update. Here, I will answer all your questions about the CRB extension.
The CRB extension comes at a cost
When Finance Minister Chrystia Freeland announced the 2021 budget, she said the government will extend the CRB to 50 weeks. That extension is finally here. But the new extension has cut the benefit amount to $600 every for two-week period. The budget left many questions unanswered at that time, which the CRA website has just clarified.
The website states that the CRB applications for the periods 22 to 25 will receive $540 after deducting a 10% withholding tax. The 22nd period starts on July 18, and the 25th period ends on September 11, 2021. The $540 CRB applies if you have already claimed the benefit for 21 periods or “you are applying for your first period on or after period 22.” All other things, like eligibility, procedure, and maximum annual CRB of $38,000, remain unchanged.
Say goodbye to the $1,000 CRB
This week is the last of getting a $1,000 CRB payment. However, any retroactive claims for periods 18 to 20 can still get $1,000 payments.
The pandemic taught some valuable investing lessons to people:
- Lesson #1: It is imperative to secure a passive source of income, because your active income may flounder at times of crisis.
- Lesson #2: With interest rates reaching near zero in a major crisis, you can’t rely solely on fixed-income securities. Diversify your passive-income streams.
- Lesson #3: Stay invested in fundamentally strong stocks, even if their price drops. Instead, buy more because strong stocks are available for a discount.
Say hello to passive income
One company that has survived the 2009 financial crisis, the 2014 oil crisis, and the 2020 pandemic is Enbridge (TSX: ENB)(NYSE: ENB). The pipeline company has been transmitting oil and natural gas to your homes, offices, and factories for over 60 years.
For the last 26 years, the company has increased its dividend per share at a compounded annual growth rate (CAGR) of 10%. It accelerated its dividend-growth rate after the 2009 and 2014 crises. It increased its dividend by 14.9% in 2010 and by 32.9% in 2015. It was only during the pandemic when its dividend-growth rate slowed to 3%. This is because the lockdown significantly reduced oil demand.
Enbridge has tested the most dangerous waters thanks to its robust business model of toll revenue. The company collects money for transmitting oil and natural gas. The stringent environmental rules have made it increasingly difficult to build new pipelines. Oil demand is also reducing, as people move to greener alternatives, like electric vehicles. This could slow Enbridge’s dividend-growth rate. But a 6.91% dividend yield compensates for the slow growth. No bank deposits will offer you a 6.9% interest rate that also increases every year.
How much do you need to invest for $500 passive income?
Passive income needs time. If you have a lump sum amount of around $60,000 to put in Enbridge, the stock can give you $500 personal CRB by 2028. A $60,000 investment through the Tax-Free Savings Account (TFSA) can give $345/month in dividends in 2021. Enbridge is unlikely to tarnish its 26-year record of dividend growth. I take a conservative estimate of a 5% dividend CAGR for the 2030 decade. At this rate, the dividend income can grow to $536 by 2030. This growth rate is faster than inflation, which means it will take care of your rising expenses.
But don’t put all your money in a single dividend stock. Diversify your money in other Dividend Aristocrats.
