Collect Passive Income With These 2 Dividend Stocks

Canadians can collect higher passive income from two lesser-known but reliable dividend payers.

| More on:
growing plant shoots on stacked coins

Image source: Getty Images

One of the easiest ways to collect passive income is through dividend investing. Canadians are fortunate, because they have two investment vehicles to either earn tax-free or to have a tax shelter. Most dividend investors gravitate towards popular companies, although others are okay with a lesser-known but dependable income provider.

Exchange Income (TSX:EIF) and Rogers Sugar (TSX:RSI) may not be anchor material in a stock portfolio, but they sure are generous dividend payers. The average dividend yield of the industrial and consumer staple stocks is 5.735%.

A combined investment of $42,000 ($21,000 investment in each) can produce $2,408.70 in passive income (around $200.73 every month). Furthermore, both stocks are eligible investments in a Tax-Free Savings Account (TFSA) and Registered Retirement Savings Plan (RRSP).

Winning acquisition strategy

Exchange Income is a $1.61 billion diversified, acquisition-oriented company. It has two core segments (Aerospace & Aviation and Manufacturing) that contribute to revenue. The company grew via a disciplined acquisition strategy. Management has successfully identified and acquired profitable, well-established companies that generate steady cash flow.  

Many acquisitions or prospects operate in niche markets with plenty of organic growth opportunities. In Q3 2021, EIC impressed investors with glowing financial results. The top and bottom lines grew 35% and 27%, respectively, compared to Q3 2020. Notably, free cash flow increased 26% to $72.8 million year over year.

EIC’s CEO, Mike Pyle, said, “The third quarter was remarkable for EIC as we achieved $400 million of revenue for the first time and hit a new quarterly high in EBITDA at $95 million.” Besides completing $70 million worth of acquisitions and spending $40 million for growth, the company reduced debt by $44 million since year-end 2020.

Likewise, the company paid $27.9 million in dividends during the quarter and $63.47 million year to date (three quarters in 2021). At $41.34 per share, investors are pleased with the 18.75% year-to-date gain on top of the above-market-average 5.52% dividend.

Important consumer staple

The importance of sugar and producing the consumer staple needs no further explanation. Rogers Sugar is a defensive asset for risk-averse investors, despite the low-growth business model. Its stock hardly fluctuates and usually stays within $5 to $6. The share price is $6.05 per share, while the dividend yield is 5.95% if you invest today.

Rogers Sugar’s fiscal 2021 results are out, and investors are encouraged by the numbers. Total revenue and net earnings grew 3.8% and 34.2% versus fiscal 2020. Sugar volumes increased 2.4%, while maple declined 1.7% year over year. Overall, it was a remarkable rebound from the COVID year.

Mike Walton, president and CEO of Rogers Sugar and Lantic Inc., said, “We are pleased with the results achieved in the fourth quarter in both of our business segments.” The company met its volume targets with improved overall sales margins. Management sees improved financial performance in fiscal 2022 when normal operating conditions are back.

Start now

If you haven’t started dividend investing, now is an excellent time because prices of goods, fuel, and other things might remain high for an extended period. It would help if you had a financial cushion in an inflationary period.

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 Christopher Liew has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

More on Dividend Stocks

potted green plant grows up in arrow shape
Dividend Stocks

Best of Both Worlds: 3 Growth Stocks That Also Pay Dividends

Dividend stocks are great until a downturn ends. But luckily, these three dividend stocks also offer a massive amount of…

Read more »

Payday ringed on a calendar
Dividend Stocks

Monthly Passive Income: 2 Top TSX Dividend Stocks to Buy in June 2023

Here are two of the best TSX monthly dividend stocks you can buy in June 2023.

Read more »

Female hand holding piggy bank. Save money and financial investment
Dividend Stocks

RRSP Wealth: 2 Great Canadian Dividend Stocks to Buy in June 2023

Top TSX dividend stocks are now on sale.

Read more »

Retirees sip their morning coffee outside.
Dividend Stocks

Retirees: 2 TSX Dividend Stocks That Reliably Pay You Cash

With strong underlying businesses, high-yielding dividends, and stable cash flows, these two TSX stocks can be excellent investments to consider.

Read more »

sad concerned deep in thought
Dividend Stocks

Better Buy for TFSA Passive Income: Telus Stock or TD Bank? 

Your passive income depends on the dividend yield you lock in. Telus and TD Bank are good investments, but which…

Read more »

Dividend Stocks

Turn a $10,000 Investment Into $844 in Cash Every Year

The power of compound interest from regular investments in quality dividend stocks can deliver solid long-term returns and make you…

Read more »

Dividend Stocks

Grab This 10.8% Dividend Yield Before It’s Gone!

This dividend stock is down 43% in the last year, and it's about to turn around in the near future.…

Read more »

grow dividends
Dividend Stocks

2 TSX Dividend Stocks With Seriously Huge Payouts 

If you are looking for dividend payouts of up to 7-11% of the stock price, now is the time, as…

Read more »