For $500 in Annual Passive Income, Invest $8,000 in This TSX Stock

Blue-chip TSX dividend stocks, such as TC Energy, are safe bets for income-seeking investors in 2023. Let’s see why.

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Employee layoffs across sectors in the last year have shown us the fickle nature of the economy. Even the largest companies in the world are not immune from an economic downturn, which means your job is never secure. So, it’s up to each individual to ensure they have the tools and resources to manage these uncertainties.

One such way is by creating multiple income streams, which will help you build long-term wealth and accelerate your retirement plans by a few years. Typically, creating a passive-income stream might require a significant amount of capital.

For instance, if you want to buy a house in Toronto and rent it out, it can easily cost you $1 million, which will mean you need to borrow capital to fund the purchase. Further, a report from Statista suggests that the gross average rental yield in Toronto amounts to less than 4%.

Comparatively, investing in high-dividend stocks trading on the TSX can help you earn a much larger yield with a small amount of capital. Let’s see how.

TC Energy stock offers investors a dividend yield of 6.6%

One of the largest companies on the TSX, TC Energy (TSX:TRP) is valued at a market cap of $55 billion. With $114 billion in assets, the energy infrastructure company currently offers investors a tasty dividend yield of 6.6%.

TC Energy owns and operates one of North America’s largest natural gas pipeline networks spanning almost 94,000 kilometres, allowing the company to tap into every major supply basin and transport 25% of the region’s daily gas needs.

It is also among the largest natural gas storage operators, with a capacity of 650 billion cubic feet. Moreover, its liquids pipelines business connects WCSB, which is a global oil reserve, to the largest refining markets in the U.S. Midwest and Gulf Coast.

TC Energy also has a power and energy solutions business that generates 4,300 megawatts of capacity. Around 75% of this capacity is derived from nuclear energy.

TC Energy has created massive wealth for long-term shareholders. Between 2000 and 2022, it has returned 11% annually, easily outpacing inflation and the TSX index. In this period, it has experienced the dot-com bubble, the great financial crash, a global pandemic, and a period of rising interest rates, showcasing the resiliency of its business model.

Despite these macro headwinds, the Canadian energy giant has increased dividends by 5.2% annually in the last 23 years. TC Energy has a visible growth portfolio and expects to deploy $34 billion towards capital expenditures through 2028. This should also support higher dividend payments in the medium term.

TC Energy$54.89146$0.90$131.4Quarterly

The Foolish takeaway

Investing $8,000 in TC Energy stock will help you earn $525 in annual dividends. If the company increases its payouts by 7% annually, your dividends could double to more than $1,000 in the next decade. Further, if you hold the investment in a TFSA, or Tax-Free Savings Account, these payouts will be exempt from Canada Revenue Agency taxes.

Investors should understand that dividend payments are not a guarantee and can be suspended or revoked at any time. But TC Energy’s contracted, and diversified cash flows provide investors with earnings visibility and should allow the company to keep paying dividends in 2023 and beyond.

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 Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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