How to Generate $10 Every Day (That’s $3,650 a Year!) in Passive Income

Dividend stocks provide investors the opportunity to earn passive income, even with a small amount of capital. In addition to regular payouts, quality dividend stocks will also generate capital gains over the long term, making them top bets, especially when markets are volatile.

Given that TSX stocks across sectors are trading at a lower multiple in the past year, let’s see how you can benefit from a generous yield and earn $3,650 in annual dividends in 2023.

An energy heavyweight

Rising commodity prices have meant the energy sector outpaced the broader markets in 2022. Despite market-beating gains, TC Energy (TSX: TRP) still offers investors a forward dividend yield of 6.3%. A well-integrated pipeline company, TC Energy transports oil and gas across North America.

TC Energy is highly profitable and reported net margins of 22% in the last 12 months. Additionally, it will also deploy $34 billion in capital expenditures to expand its portfolio of cash-generating assets in the future. These investments should drive cash flows and dividend payouts higher for the energy heavyweight. In the near term, TC Energy expects to increase dividends between 3% and 5%.

Priced at 13 times forward earnings, TRP stock is reasonably valued and remains a solid buy. Analysts remain bullish on TC Energy stock and expect shares to surge over 10% in the next year. After accounting for dividends, total returns will be closer to 17%.

Pembina Pipeline

A TSX stock that pays shareholders a monthly dividend, Pembina Pipeline (TSX: PPL) has returned over 20% in each of the last two years. PPL stock currently offers investors a dividend of 5.4%, which is quite tasty.

Similar to TC Energy, Pembina Pipeline operates in the midstream space. In the last three quarters, its revenue surged by 45% year over year on the back of robust demand for midstream services. Its adjusted earnings also surged by 148% in this period.

Pembina Pipeline expects adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) between $3.5 billion and $3.8 billion in 2023, which is similar to its EBITDA forecast for 2022.

Investors are worried about a global recession impacting oil prices in 2023. But the reopening of China and geopolitical tensions will act as tailwinds for energy prices this year.

TransAlta Renewables

The final stock on my list is TransAlta Renewables (TSX: RNW), a Canada-based company that offers shareholders a dividend yield of 7.7%. Given the accelerated shift towards clean energy solutions globally, TransAlta Renewables is well positioned to deliver consistent returns to investors in the next two decades.

With a portfolio of 40 renewable energy facilities located in the Americas and Australia, TransAlta Renewables has exposure to solar, hydro, and wind energy. These facilities provide the company with a defensive moat as its contracts are long-term and regulated, ensuring predictable cash flows across business cycles.

RNW stock is priced at a discount of almost 20% to consensus price target estimates. After accounting for its dividend yield, total returns will be closer to 25%.

The Foolish takeaway

In order to earn $10 in dividends every day, or $3,650 each year, you need to invest $18,718 equally in these three stocks. You can also identify similar blue-chip stocks trading on the TSX and diversify your portfolio further.