The 4 Best Passive-Income Stocks to Buy Right Now With $400

These dividend stocks are among the options to create a secondary income stream.

money cash dividends

Image source: Getty Images

It’s wise to have a passive income, and I find dividend stocks as the best option to create a secondary income stream. While Canadian investors have plenty of options when it comes to dividend stocks, I have shortlisted four among them that I believe have the potential to boost shareholders’ returns over the long term.  

These companies have resilient cash flows, while their payouts are sustainable, implying that investors can rely on them. So, if you can spare $400, consider buying these top dividend stocks now to start a passive-income stream. 

Toronto-Dominion Bank

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) has been uninterruptedly paying dividends for 164 years and could be a solid addition to your income portfolio. Its dividend has increased at a compound annual growth rate (CAGR) of 11% in the last 25 years. At current price levels, Toronto-Dominion offers a dividend yield of 3.7%. 

Thanks to its high-quality earnings base, the bank will likely grow its dividend at a healthy pace in the coming years. Further, its diversified revenues, improved credit performance, robust balance sheet, and strong deposits base augur well for future growth. Meanwhile, economic recovery, reduction in operating costs, and lower provisions are likely to cushion its earnings and, in turn, its dividend payouts. 

Pembina Pipeline

Pembina Pipeline (TSX:PPL)(NYSE:PBA) is another reliable bet if you seek to generate a steady passive income. It has paid regular monthly dividends for a very long period and currently yields approximately 6.4%. Pembina has raised its dividend annually by about 5% in the last 10 years. Meanwhile, its payouts are safe and sustainable. 

Pembina’s diverse asset base, contractual framework, and sustained momentum in core business generate robust fee-based cash flows that support higher dividend payments. I believe improved energy outlook, secured growth projects, strong volume growth, increased pricing, and expense management will likely boost its future fee-based cash flows. It is trading cheaper than its peers, making it attractive at current levels.

Algonquin Power & Utilities 

Algonquin Power & Utilities (TSX:AQN)(NYSE:AQN) is another top-quality Canadian stock for a reliable passive income. Its earnings have grown at a healthy pace, which supported its dividend payments. Notably, it has increased its dividend at a CAGR of 10% for over a decade. 

I believe its low-risk profile, regulated utility assets, and rate base growth could continue to deliver predictable cash flows in the coming years. Its long-term power-purchase agreements, strategic acquisitions, and growth opportunities in the renewable business could further bolster its growth rate and drive higher dividend payments. At current price levels, Algonquin offers a healthy yield of 4.3%. 

Canadian Utilities

I’ll wrap up with Canadian Utilities (TSX:CU) stock, which must be in your income portfolio for a growing cash inflow. Canadian Utilities has a long history of rewarding its shareholders with higher payouts and has raised its dividends for 49 years. Meanwhile, at current price levels, Canadian Utilities offers a solid yield of about 5%. 

Canadian Utilities’s higher dividend payments are supported by its stellar earnings and resilient cash flows that come from its high-quality contractual and rate-regulated assets. Further, its low-risk business, continued investment in contracted and regulated assets, improvement in its energy infrastructure business, and cost savings indicate that the company will likely deliver higher shareholders’ returns in the coming years.

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 recommends PEMBINA PIPELINE CORPORATION.

More on Dividend Stocks

Family relationship with bond and care
Dividend Stocks

Invest in These TSX Stocks Now and Retire With Peace of Mind

Canadian stocks like Brookfield Asset Management (TSX:BAM) offer long term investment potential.

Read more »

The TFSA is a powerful savings vehicle for Canadians who are saving for retirement.
Dividend Stocks

TFSA Passive Income: 4 Stocks to Buy and Never Sell

These four TSX dividend stocks could boost your passive income.

Read more »

growing plant shoots on stacked coins
Dividend Stocks

2 Risky Dividend Stocks to Avoid (and 2 Safe Ones)

Looking for dividend income? Here are two stocks to avoid and two stocks to readily buy for safe and steady…

Read more »

question marks written reminders tickets
Dividend Stocks

Is Telus Stock the Best High-Yield Dividend for You? 

Would you invest in a stock that gives a 7% yield or a 22% yield? Telus is a high-yield stock…

Read more »

exchange-traded funds
Dividend Stocks

2 Canadian ETFs to Buy and Hold Forever in Your TFSA

Both of these Vanguard ETFs pay monthly dividends from Canadian stocks.

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

TFSA Income: 3 Canadian Dividend Stocks to Hold for a Lifetime

Looking for passive income that lasts? These three dividend stocks offer some of the best long-term growth opportunities, and dividends…

Read more »

A colourful firework display
Dividend Stocks

2 Potentially Explosive Stocks to Buy in July

Just because a company is a blue-chip TSX stock, doesn't mean the growth is all but over. In fact, these…

Read more »

Hand arranging wood block stacking as step stair with arrow up.
Dividend Stocks

3 Stocks Set for Dividend Increases This Year

Dividend-growth stocks offer a great mix of income and capital upside. Here are three stocks for more dividend growth ahead.

Read more »