1 Proven Strategy to Get Ahead of Inflation: Earn Monthly Passive Income

Canadians can better cope with inflation by earning passive income from stocks that pay dividends each month.

| More on:
money cash dividends

Image source: Getty Images

We all know that our money and savings lose value at a faster pace when inflation keeps rising. In June, the inflation reading rose to 8.1% and July’s rate, which will come out on August 16, 2022, could be higher. Meanwhile, data from Trading Economics showed that the household savings rate in Canada for Q1 2022 was also 8.1%.

The household savings rate peaked to 28.2% in Q2 2020 due to pandemic dole outs from the federal government. But with the end of stimulus programs and the soaring costs of living, will Canadians save more?

Dividend investing is a tested and proven strategy to cope with inflation. Stocks can be risky assets, but there are high-quality stocks available for risk-averse investors. And, the passive income your money earns from these stocks can minimize inflation risks.

Save differently   

In April 2022, Tony Salgado, president and founder of AMS Wealth, said “I don’t think higher interest rates are going to motivate people to save more.” However, he added, “I think it’s probably going to motivate people to save differently.” His advice is to not leave money idle or in a cash account. Instead, consider putting it into an income-producing savings account or instrument.

Dividend stocks are ideal compared with other investment options because of higher returns and recurring passive income streams. Most dividend stocks offer a quarterly pay out frequency, but some firms pay every month or 12 times in a year. Earning monthly passive income can equip you to better cope with inflation and preserve purchasing power.

Top monthly income stock

Pembina Pipeline (TSX:PPL)(NYSE:PBA) is a top pick among the rare breed of monthly income stocks. This top-tier energy stock is also an ideal anchor in tax-advantaged or tax-sheltered investment accounts like the TFSA and RRSP. The current share price is $48.89, while the dividend yield is a handsome 5.15%.

A $50,000 position in Pembina will generate $214.58 in monthly passive income. Current investors are up 31.62% year-to-date as the energy stock continues to outperform the broader market. According to management, the company remains resilient, notwithstanding the global economic and health uncertainties.

Pembina is a $27 billion provider of transportation and midstream services in the energy industry. The company boasts a diversified integrated asset base and low-risk business model. Because of its strong earnings results in Q1 2022 and positive momentum, Pembina is well-positioned to build on its base business and capitalize on long-term growth opportunities.

Back-up to Pembina

First National Finance Corporation (TSX:FN) is a suitable back-up to Pembina. The $2.24 billion originator of residential (single-family and multi-unit) and commercial mortgages also pays monthly dividends. This non-bank stock trades at $37.48 per share and pays a lucrative 6.27% dividend.

In Q2 2022, net income increased 17% to $61.3 million versus Q2 2021. Notably, mortgage under administration (MUA) rose 5% year-over-year to a record $127.4 billion. Company President and CEO, Jason Ellis, said, “First National’s second quarter performance, including steady growth in MUA, was delivered in competitive markets that are now adjusting rapidly to the reality of much higher interest rates.”  

Formidable combo

Dividend frequency is now a major consideration for many income investors. Pembina and First National is a formidable combination if you’re looking to passively add income to your monthly budget in this inflationary environment.

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 PEMBINA PIPELINE CORPORATION.

More on Dividend Stocks

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 »

edit Taxes CRA
Dividend Stocks

Tax Time: How to Keep More of Your Money

Nearly everyone hates paying taxes, although Canadians can lessen the financial pain with the right tax strategies.

Read more »