Are you looking to create a reliable source of monthly passive income in Canada? If yes, you should definitely give dividend investing a shot before getting into more complex and less-flexible ways of earning passive income. By buying a fundamentally strong dividend stock when it’s cheap, you can expect to receive solid returns on your investments with an expected appreciation in its share prices over the long term. In addition, you can earn monthly passive income from its dividends.
In this article, I’ll highlight one of the best Canadian monthly dividend stocks on the Toronto Stock Exchange that I find cheap to buy now and hold for the long term. At the end of the article, I’ll explain how it could help you generate $1,000 in monthly passive income without putting in much effort.
The best dividend stock to earn monthly passive income in Canada
Once you’ve decided to invest your hard and savings in Canadian dividend stocks — especially to earn monthly passive income, you should ideally pick a stock with a well-proven track record of financial growth. But at the same time, you must not ignore its future growth prospects. For example, if a TSX stock has witnessed strong financial growth in the past, but its future growth prospects aren’t good, you may want to avoid relying on it to generate passive income.
Keeping these factors in mind, I find the shares of Markham-based Sienna Senior Living (TSX: SIA) quite attractive. As its name suggests, it’s a provider of seniors’ living options ranging from long-term care to assisted living to independent living. Sienna currently has $1.7 billion worth of assets, as it runs 42 long-term-care communities, 38 retirement residences, and 13 managed residences spread across three Canadian provinces — Ontario, Saskatchewan, and British Columbia.
Sienna Senior Living distributes its dividend payouts on a monthly basis and has an attractive yield of around 8.1% at the time of writing. Now, let’s find out why its dividends could become a reliable source of passive income for you.
Key factors to know before buying it for passive income
While dividend investing isn’t risk free, you can try to minimize risks by learning beforehand about the stock you’re investing in. Like most of its peers, Sienna’s key risks are from factors like high inflation and labour shortages. In 2020, the company’s financial growth was hampered by the COVID-19 pandemic-related restrictions. Nonetheless, its earnings growth came back on track in 2021, as Sienna reported adjusted earnings of $0.31 per share for the year, even much stronger than its pre-pandemic year 2019’s adjusted earnings of $0.11 per share.
While inflationary pressures are affecting its profitability in 2022, occupancy improvements at its properties and increasing average rental rates are helping it maintain healthy earnings growth. Despite these positive factors, this Canadian monthly dividend stock has seen about 23% value erosion this year to trade at $11.54 per share, making it look undervalued.
More than Sienna’s financial growth track record, I find its future growth prospects really attractive. According to the 2021 census, seniors’ population in Canada in the plus 85 years age group is expected to triple in the next 25 years, which should create huge demand for seniors’ living services providers. This is one of the key reasons Sienna is continuing to expand its network of retirement residences apart from focusing on organic growth. These factors could help the company exponentially accelerate its financial growth in the long run.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| Sienna Senior Living | $11.54 | 12,825 | $0.078 | $1,000.35 | Monthly |
| Prices as of Nov. 22, 2022 |
Bottom line
If you want to earn about $1,000 in monthly passive income, or over $12,000 a year, from Sienna stock, you can consider buying its 12,825 shares at the current market price. To own these many stocks, however, you’ll need to invest about $148,000 in its stock. While I hope this example gives you a good idea of how you can generate passive income in Canada, you must consider diversifying your portfolio instead of investing such a big sum of money in a single dividend stock.
