Need Passive Income? Turn $15,000 Into $1,016 Annually With These 2 Dividend Stocks

Canadian investors with limited capital can create passive-income streams from two high-yield dividend stocks.

| More on:
growing plant shoots on stacked coins

Image source: Getty Images

People need stable cash flows, especially during recessions. The stock market could be unstable, but you can’t give up the opportunity to earn passive income completely. Many market analysts believe energy stocks are excellent choices in 2023, because they could outperform again, as they have in the past two years.

Moreover, the same analysts add that high dividends, not oil prices, will spur appetite for the red-hot sector. Enbridge (TSX:ENB) and Freehold Royalties (TSX:FRU) should be top-of-mind choices if you invest right now. The former pays a generous 6.56% dividend, while the latter offers a juicy 6.94% yield.  

With an average dividend yield of 6.75% today, a $15,000 investment can generate $1,016 in passive income annually. The table below shows the number of shares you can buy for each energy stock and the corresponding passive income in one year.

CompanyPriceNo. of SharesDividend per ShareTotal PayoutFrequency

Abundant growth drivers

Management is confident that Enbridge is well positioned to grow the business well into the future. Besides its vast pipeline network, the blue-chip franchises should continue to bring in significant free cash flow (FCF). The $110.27 billion energy infrastructure company is executing its $17 billion capital program (2021 to 2024) and sees a $6 billion organic growth potential annually after 2024.

Enbridge’s competitive advantage is its diversified pipeline-utility model that drives predictable results in all market cycles. According to management, 80% of EBITDA (earnings before interest, taxes, depreciation, and amortization) has inflation protections.

Furthermore, the utility-like cash flows are highly predictable since 98% of cost-of-service, take-or-pay, and tolling arrangements are under long-term contracts. The current portfolio is strong because of the superb business mix. Liquids pipeline accounts for 58% of EBITDA, followed by Gas Transmission (26%), Gas Distribution (12%), and Renewable Power (4%).

However, the best part is the energy stock’s Dividend Aristocrat status. Besides the high yield, Enbridge has raised its dividend for 26 consecutive years. The resiliency and longevity of its cash flows support the unfailing dividend hikes every year.        

The royalty advantage

Like Enbridge, Freehold Royalties isn’t an oil producer. However, it creates shareholder value through the lease-out programs of its vast royalty lands in Canada and the United States. The $2.33 billion royalty oil & gas company receives revenue from royalties on crude oil, natural gas, natural gas liquids (NGLs), and potash properties.

Freehold has royalty interests in over 15,000 producing wells, where around 350 industry operators provide royalty income. The royalty advantage stems from the drilling activity of these operators and zero capital investments by Freehold.

Management has yet to report the full-year 2022 results, although net income after three quarters jumped 312% year over year to $168.44 million. In the same period, the $100.9 total dividend payment of $100.9 million was $63 million higher than in the first nine months of 2021. Note, too, that Freehold is a monthly income stock.

Low-risk profiles

The challenge to most investors in 2023 is overcoming the recession and protecting capital. Enbridge and Freehold are ideal choices if you expect the energy sector to do well in 2023. The business models are low risk, FCF is growing, and dividend payments are sustainable.

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 Enbridge and Freehold Royalties. The Motley Fool has a disclosure policy.

More on Dividend Stocks

grow dividends
Dividend Stocks

3 Canadian Stocks With a Real Chance of Doubling Your TFSA’s Value

Three outperforming Canadian stocks can help TFSA investors double their account balances.

Read more »

Hand writing Time for Action concept with red marker on transparent wipe board.
Dividend Stocks

3 No-Brainer Stocks I’d Buy Right Now Without Hesitation

At any given time, the market may have certain stocks that offer a powerful combination of reliability, potential, valuation, etc.,…

Read more »

money cash dividends
Dividend Stocks

This 8.39% Dividend Stock Can Pay $100 Cash Every Month

Consider investing in this monthly dividend stock at current levels to lock in high-yielding monthly distributions to create a good…

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

Here’s the Average TFSA Balance in 2024

The Bank of Montreal (TSX:BMO) says that the average TFSA balance is $41,510, far below the maximum.

Read more »

A glass jar resting on its side with Canadian banknotes and change inside.
Dividend Stocks

Investors: Here’s How to Make $1,000 Each Month in Retirement

Here's how you can easily make $1,000 in monthly passive income in retirement in Canada, without taking on too much…

Read more »

man touches brain to show a good idea
Dividend Stocks

3 No-Brainer TSX Stocks I’d Buy Right Now Without Hesitation

Three TSX stocks that continue to overcome massive headwinds and beat the market are no-brainer buys right now.

Read more »

calculate and analyze stock
Dividend Stocks

TFSA Investors: 2 Top TSX Dividend Stocks to Buy on a Dip and Hold Forever

These top TSX dividend stocks now offer attractive yields and big potential capital gains.

Read more »

grow money, wealth build
Dividend Stocks

1 Dividend Stock to Buy for Growth and Stay for a 5.5% Yield

This dividend stock has been rising higher, but more could certainly be on the way. Now is the time to…

Read more »