Got $500? 2 Simple TSX Stocks to Buy Right Now

Do you have an extra $500? Consider investing in simple stocks, like Bank of Nova Scotia (TSX:BNS)(NYSE:BNS), that pay you generous dividend income.

| More on:
A worker uses a double monitor computer screen in an office.

Source: Getty Images

If you got an extra $500, you should consider investing on commission-free trading platforms on Wealthsimple or National Bank of Canada. Particularly, here are a couple of simple TSX stocks that will make you richer over time.

Scotiabank stock for passive income

Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) is a simple TSX stock to buy for passive income. The Canadian bank just reported its fiscal third quarter (Q3) earnings and dipped more than 5% yesterday, making it an opportunistic buy at a relatively high dividend yield of 5.4%. Its dividend remains safe, as it maintains a payout ratio of below 50%.

Its overall results for the quarter were stable with adjusted earnings per share (EPS) rising 4.5% year over year. Higher net interest income and loan growth helped drive earnings growth of 12% and 28% at its core business segments of Canadian Banking and International Banking, respectively. However, these results were offset by its Global Banking and Markets earnings that saw a substantial decline of 26% to $378 million, driven by lower capital markets revenue because of market conditions and lower advisory fees.

Because of Scotiabank’s international exposure, its earnings growth can be bumpier than its big Canadian bank peers. Regardless, it still remains a profitable business through economic cycles. Its trailing 12-month (TTM) net income was about $10.6 billion. BNS’s fiscal year-to-date adjusted EPS growth was 11.2% versus the prior year’s period.

In the long run, the bank should experience stable earnings growth. For instance, in the past 10 years, its adjusted EPS increased at a compound annual growth rate of 5.3%. Assuming an EPS growth rate of 5%, the bank stock could result in long-term returns of approximately 11-14% annually over the next three to five years.

Another dividend stock for passive income

Sun Life (TSX:SLF)(NYSE:SLF) also earns multi-billions of dollars of net income each year. Its annualized net income is about $4 billion. The life and health insurance company is planning to sell its U.K. business, which manages life and pension policies and annuities, to Phoenix Group for about $385 million.

Management expects this transaction to provide growth opportunities for Sun Life’s asset management businesses. As part of the sale, Sun Life will become a long-term asset management partner to Phoenix, which is the U.K.’s largest long-term savings and retirement business that has more than 13 million customers and £310 billion of assets under administration

The stable stock’s five-year total returns are about 8% per year. This is a decent return given the stock has experienced valuation contraction and a selloff in the period. At $59.43 per share, the dividend stock trades at about 10 times earnings — a discount of about 17% from its long-term normal valuation. Over the next three to five years, the stock could deliver annualized returns of about 11-17%.

Investors get an initial dividend yield of 4.6%. Its TTM payout ratio of 42% is sustainable. For reference, the Canadian Dividend Aristocrat’s five-year dividend-growth rate is 7.4%. Over the next three to five years, the insurance company could experience an EPS growth rate of about 6.5%.

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 Kay Ng has no position in any of the stocks mentioned. The Motley Fool recommends BANK OF NOVA SCOTIA.

More on Dividend Stocks

Retirement plan
Dividend Stocks

Planning for Retirement? Here Are the Best Canadian Dividend Stocks to Buy

Buying two of the best Canadian dividend stocks now for the long term can help you retire without financial worries.

Read more »

investment research
Dividend Stocks

A Dividend Giant I’d Buy Over TD Bank Stock

Energy and financials are the TSX’s sector heavyweights, but I’d choose a dividend giant in the former over a big…

Read more »

edit Business accounting concept, Business man using calculator with computer laptop, budget and loan paper in office.
Dividend Stocks

2 Dividend Stocks Worth a Permanent Spot in My TFSA

Restaurant Brands International (TSX:QSR) and Berkshire Hathaway (NYSE:BRK.B) are two of my top TFSA holdings that I intend to hold…

Read more »

Increasing yield
Dividend Stocks

3 Canadian Dividend Stocks Offering High Yields and Reliable Income

These valuable dividend stocks offer solid deals right now, with ultra-high yields that will certainly last well beyond this downturn.

Read more »

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 »