Dividend Income: Earn $500/Month With These Top TSX Stocks

These top dividend stocks are a great source of secondary income and will likely boost your portfolio’s returns in the long term.

Sneha Nahata

Sneha is a M.Sc. in finance and has been a Motley Fool contributor since mid-2020. Sneha specializes in writing about bank, energy, consumer and TMT (technology, media, and telecom) stocks. She focuses on identifying winning long-term stock picks.

Published December 13, 2021 8:00 am EST

Dividends boost the overall returns of your portfolio in the long run. Another way of looking at dividends is that they could be a great source of secondary income. For instance, there are companies that have been consistently paying and increasing their dividends for a very long period, making them a reliable investment to generate a steady inflow of income.

Let’s look at a few TSX stocks you could consider buying for a stable dividend income.

Pembina Pipeline

Pembina Pipeline (TSX: PPL)(NYSE: PBA) owns diversified and integrated transportation and midstream assets. Thanks to its profitable growth, Pembina has consistently paid and increased its dividends, making it one of the top investments for income investors. Notably, Pembina pays monthly dividends, while its stock yields more than 6.7%.

Pembina’s dividend payments and high yield is supported through its contracted assets that generate robust fee-based cash flows. Looking ahead, volume increases on existing assets, higher commodity prices, and new assets placed into service will drive its earnings and, in turn, its payouts.

It’s worth noting that Pembina stock is trading cheap. Its forward EV/EBITDA multiple of 10 is lower than its historical multiple of 11.3 and peer group average of 11.5. Further, its P/E ratio of 14.8 also compares favourably to its historical average. Overall, its low valuation, high yield, and robust fee-based cash flows support my bullish view.

NorthWest Healthcare Properties

With its defensive healthcare real estate portfolio, NorthWest Healthcare Properties REIT (TSX:NWH.UN) should be on your radar. Like Pembina, NorthWest Healthcare pays monthly dividends and is offering a high yield of about 6%.

To give background, NorthWest Healthcare owns a diversified real estate portfolio of medical office buildings, hospitals, and clinics that generate resilient cash flows and support its payouts. Furthermore, the majority of its tenants are backed by government funding. It is worth noting that NorthWest Healthcare’s occupancy rate remains high, with an average lease expiry term of 14.2 years.

Looking ahead, its low-risk cash flows, expansion into newer markets in Western Europe and North America, rent indexation, and balance sheet optimization initiatives suggest that the company could continue to enhance its shareholders’ returns through consistent dividend payments.

Enbridge

Enbridge (TSX: ENB)(NYSE: ENB) is one of the top income stocks listed on the TSX. Unlike Pembina and NorthWest, Enbridge pays a quarterly dividend but yields higher than both these companies. Enbridge has a long history of increasing its dividends (27 years in a row) and is offering a stellar yield of 7.2%.

Notably, Enbridge owns a diversified business that generates utility-like, predictable cash flows. Meanwhile, its contractual framework, robust secured capital program, higher asset utilization rate will likely drive future cash flows and dividend payments.

Overall, its solid track record of dividend payments, revenue inflators, productivity enhancements, and strategic acquisitions indicate that Enbridge could continue to boost its shareholders’ returns through share buybacks and higher dividend payments.

Bottom line

Despite their high yields, the payouts of these top TSX stocks are safe and sustainable in the long run. At the current levels, a $30,000 investment in each of these stocks would result in a dividend income of approximately $6,000/year or $500/month.