It’s undeniable that uncertainty and volatility in the stock market make investing challenging. However, this shouldn’t stop you from earning while you sleep. Thankfully, several Canadian corporations pay reliable dividend and high yields, making them an attractive investments to generate steady passive income, irrespective of where the broader market is headed. Further, investing through the TFSA (Tax-Free Savings Account) route is even better, as you don’t pay taxes on the dividend income.
So, if you like tax-free passive income, here are two stocks (with stellar dividend payment history and lucrative yield) that would generate a worry-free income of $307/month for an investment of $50K. Let’s dig deeper.
A top energy stock
Enbridge (TSX:ENB) is one of the best dividend stocks listed on the TSX. There are solid reasons why I’m optimistic about its dividend payouts. Enbridge has been paying dividend for 67 consecutive years. This highlights that its payouts are safe, even amid a challenging economic environment.
Further, it has increased its dividend for 27 years (even amid the pandemic). Meanwhile, Enbridge’s dividend has had a CAGR (compound annual growth rate) of 13% since 2008.
Its robust dividend payment and growth are supported by its two-pronged strategy, including the continued expansion of existing conventional pipeline and export businesses and accelerated investments in renewable energy assets. This strategy positions it well to capitalize on solid energy demand. Further, it has diversified income streams that support its EBITDA (earnings before interest, taxes, depreciation, and amortization) and DCF (distributable cash flows) growth and drives its payouts.
Investors should note that Enbridge’s EBITDA has had a CAGR of 14% since 2008, which has driven its DCF per share and higher dividend payments. Moreover, about 80% of its EBITDA has protection against inflation, which is encouraging.
The momentum in its base business and contractual arrangements will likely support its financials. Meanwhile, its $10 billion diversified secured growth program will further support its future cash flows and payouts. Its target payout ratio of 65% of DCF is sustainable in the long term, while TFSA investors can earn a high yield of 6.8% by investing in Enbridge stock at current levels.
A dependable REIT
Due to their high payouts, REITs are an attractive investment for passive-income seekers. Within this space, I am confident about the payouts of NorthWest Healthcare Properties REIT (TSX:NWH.UN). The primary reason for my optimism is its healthcare-focused defensive assets. Meanwhile, its high-quality tenant base supports my bull case.
Investors should note that NorthWest Healthcare’s assets are geographically diversified. Meanwhile, approximately 80% of its tenants are supported by government funding. Further, NorthWest Healthcare’s occupancy rate remains high at about 97%.
While its business remains relatively immune to market cycles, its long lease expiry term adds stability. Also, nearly 82% of NorthWest’s rents have protection against inflation.
Overall, NorthWest’s solid asset base, high-quality tenants, expansion in the U.S., and strong development pipeline will likely support its financials and payouts. Further, it offers a lucrative dividend yield of 7.9%.
Bottom line
While the payouts of these two TSX stocks are well protected, they offer an average dividend yield of 7.4%. Thus, a $50K investment in these two stocks could generate a worry-free passive income of about $3,685 a year, or about $307/month.
