Looking for Passive Income? Invest in These 3 Canadian Stocks

Here are three top Canadian stocks that could provide you with excellent passive income.

| More on:
Dollar symbol and Canadian flag on keyboard

Image source: Getty Images

Creating a source of passive income should be a goal of all investors. By building a strong enough source of passive income, investors can supplement and eventually replace their primary source of income. This could give you the opportunity to spend more time on the things you’d like to do instead of being tied down to your job. In this article, I’ll discuss three top Canadian stocks that could provide you with excellent passive income.

This company has a strong history of increasing dividends

The first company that investors should consider holding as a source of passive income is Fortis (TSX:FTS)(NYSE:FTS). When looking for dividend stocks, investors should focus on companies that have a long history of paying dividends year after year. That’s exactly what Fortis is known for. The company is known as a Canadian Dividend Aristocrat. In fact, it currently holds the second-longest active dividend-growth streak in Canada at 47 years.

Fortis may be able to attribute its reliable dividend to the nature of its business. As a provider of regulated gas and electric utilities, Fortis often sees consistent demand for its services regardless of the economic condition. As of this writing, Fortis stock offers a forward dividend yield of 3.81%. Therefore, a $10,000 investment would net you $381 per year in dividends.

Here’s a company that has been able to grow its dividend at a fast rate

While finding companies that increase dividends over time is certainly an important factor to consider, it’s hardly the only thing to consider. Investors should also look for companies that are able to increase dividends at a faster rate than inflation. This ensures that the passive income you receive from these stocks doesn’t lose value over time. A great example of such a company is goeasy (TSX:GSY).

Another Canadian Dividend Aristocrat, goeasy has managed to increase its dividend each year since 2015. Over the period, goeasy’s dividend has increased at a compound annual growth rate of more than 30%. Even more impressively, goeasy’s payout ratio is stunningly low (16.34%). This suggests that the company should be able to continue growing its dividend over the coming years.

Stick to blue-chip companies

If you’re still having trouble finding dividend stocks to add to your portfolio, narrow your focus on blue-chip companies. These are companies that are well established and have a large presence in their respective industries. In Canada, the S&P/TSX 60 Index is a great place to start looking. The companies listed in that index are regarded as leaders in leading industries within the country. An example of a blue-chip stock investors should consider is Brookfield Asset Management (TSX:BAM.A)(NYSE:BAM).

With a portfolio of more than $625 billion, Brookfield is one of the largest alternative asset management firms in the world. Its portfolio is very diversified, featuring assets in the real estate, infrastructure, and utility industries. Currently, Brookfield’s dividend yield is nothing too impressive (0.86%). However, it does maintain a very low payout ratio (28.25%). Like goeasy, it’s very likely that Brookfield will continue increasing its dividend over time.

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 Jed Lloren has no position in any of the stocks mentioned. The Motley Fool recommends Brookfield Asset Management Inc. CL.A LV and FORTIS INC.

More on Dividend Stocks

Dividend Stocks

The Top Canadian REITs to Buy in April 2024

For growth and dividends this April, look to these two REITs that have quite the promising present as well as…

Read more »

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Dividend Stocks

TFSA Magic: Earn Enormous Passive Income That the CRA Can’t Touch

If you're seeking out passive income, with zero taxes involved, then get on board with a TFSA and this portfolio…

Read more »

Man with no money. Businessman holding empty wallet
Dividend Stocks

2 Stocks Under $50 New Investors Can Confidently Buy

There are some great stocks under $50 that every investor needs to know about. Here’s a look at two great…

Read more »

think thought consider
Dividend Stocks

Down 10.88%: Is ATD Stock a Good Buy After Earnings?

Alimentation Couche-Tard (TSX:ATD) stock might not be the easy buy-case it once was. Here’s a look at what happened.

Read more »

money cash dividends
Dividend Stocks

TFSA Dividend Stocks: Earn $1,200/Year Tax-Free

Canadian stocks like Fortis are a must-have in your portfolio to earn tax-free yields for decades.

Read more »

sale discount best price
Dividend Stocks

1 Dividend Stock Down 11 Percent to Buy Right Now

Do you want a great dividend stock down 11% that can provide years of growth potential? Here's one heavily discounted…

Read more »

Growth from coins
Dividend Stocks

1 Grade A Dividend Stock Down 11% to Buy and Hold Forever 

If you're looking for the right dividend stock at the right price, you're going to want to consider this insurance…

Read more »

Target. Stand out from the crowd
Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

Are you looking for dividend stocks to buy right now? Here are two top picks!

Read more »