Earn 5% Passive Income for Less Than $20

Yield-hungry investors can earn 5% or more in passive income from three relatively cheap dividend stocks.

| More on:

A portfolio of dividend stocks that pays at least 5% should be very attractive to income investors. However, the combination of TransAlta Renewables (TSX:RNW), Superior Plus (TSX:SPB), and Choice Properties (TSX:CHP.UN) is super attractive, because all three trade for less than $20.

Would-be investors get real value for money from two utility stocks and one real estate investment trust (REIT). Every $20 investment will generate $1 in passive income. If your position is 1,500 times more, the dividend income should be $1,500.

Fully contracted assets

TransAlta Renewables’s primary objective is to create stable cash flows and consistent returns for investors. The investment vehicle to achieve its objective is through its power-generation facilities (wind, hydro, and gas). Also, the assets of this $4.99 billion company are fully contracted and long term with credit-worthy counterparties.

The renewable utility company operates in Canada, Australia, and the United States. According to management, all of its facilities are fully operational, notwithstanding the pandemic-related challenges. The share price fell to $16.38 on news TransAlta’s turbine in New Brunswick collapsed.

TransAlta Renewables will spend $75 million to $100 million to replace the foundation at the wind farm. It will take until year-end 2023 to finish the job. According to the company statement, it expects to lose $3.4 million per month in revenue while the turbines are offline. If you invest today, the dividend yield is 5.22%.

Mature industry

Superior Plus is a distributor and marketer of propane and distillates in Canada and the United States. The $2.39 billion company aims to create value through differentiation and best-in-class operations in all of its operating business segments. In Q3 2021, total revenue increased 41.2% versus Q3 2020, although the third quarter is Superior’s seasonally lowest.

Luc Desjardins, president and CEO of Superior Plus, said, “Our sales volumes were higher due to acquisitions completed in the past 12 months.” The company spent around $625 million for the deals. Likewise, continues to see a robust pipeline of acquisition opportunities in the home country and across the border.

Superior operates in a mature industry, and therefore, there are high barriers to entry plus substantial free cash flow potential. More importantly, the business of distributing propane and propane-related products and services is enduring. The utility stock trades at $12.94 and pays a 5.57% dividend.

National footprint

Choice Properties is a pure dividend play. The $4.71 billion REIT owns, operates, and develops high-quality commercial and residential properties. Its diversified portfolio (718 income-producing properties) has a national footprint. The REIT also has a strategic relationship with Loblaw, Canada’s largest retailer.

Loblaw is an among the Choice Properties’s top 10 tenants and contributes 55.3% of gross revenue. Other high-quality tenants include Canadian Tire and Dollarama. After Q3 2021, the occupancy rate is 97%, while the remaining lease expiry is 6.1 years (6.7 years for Loblaw).

Another strong point is the REIT’s focus on necessity-based retail tenants with a strong composition of national retailers. About 70% of retail net operating income (NOI) comes from grocery stores and pharmacy. The real estate stock trades at $14.80 and pays a flat 5% dividend.

Feast on the high yields

Yield-hungry investors can feast on the dividends from three relatively cheap income stocks.

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 recommends SUPERIOR PLUS CORP.

More on Dividend Stocks

A close up color image of a small green plant sprouting out of a pile of Canadian dollar coins "loonies."
Dividend Stocks

Passive Income: 2 Dividend-Growth Stocks to Buy on a Dip

These stocks have increased their dividends annually for decades.

Read more »

hand stacks coins
Dividend Stocks

Should You Buy This 6.63% Dividend Stock for Consistent Passive Income?

A high-yield defensive stock is suitable for investors seeking consistent passive income.

Read more »

RRSP Canadian Registered Retirement Savings Plan concept
Dividend Stocks

Building an RRSP Fortune: 4 Key Insights

The RRSP is not only a tax-saver but a wealth-builder for Canadian income earners.

Read more »

Sliced pumpkin pie
Dividend Stocks

Market Sell-Off: Why These 2 TSX Blue-Chip Stocks Are Too Attractive to Ignore Right Now

Investors worried about the sell-off due to trade tensions might want to secure their investment capital by investing in these…

Read more »

Piggy bank with word TFSA for tax-free savings accounts.
Dividend Stocks

Transform Your TFSA Into a Tax-Free Monthly Income Machine ($193 a Month!)

These TSX dividend stocks offer high yields and monthly payouts. You can earn over $193 in tax-free income per month.

Read more »

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

TFSA: Invest $10,000 in This TSX Stock That Thrives During Market Volatility

This TSX stock isn't your typical investment, but that could be a major benefit for investors.

Read more »

GettyImages-1394663007
Dividend Stocks

8% Yield: 2 Stocks I’d Buy in April 2025

April had a bearish start because of Trump’s reciprocal tariffs. This dip created an opportunity to lock in an 8%…

Read more »

A worker uses a laptop inside a restaurant.
Dividend Stocks

A Misunderstood Growth Stock Down 23%: Why I’m Considering goeasy for a $5,000 Investment

goeasy stock remains a good growth stock for a diversified long-term investment portfolio.

Read more »