The Canadian Tax-Free Savings Account (TFSA) is a powerful tax-advantaged account that allows investments to exponentially compound without any tax drag, forever. As shown by the Rule of 72, a consistent 7% annual return on a tax-free investment could double your money in just over 10 years. TFSA investors could easily attempt to double their investment portfolios in a similar fashion by locking in and reinvesting the juicy dividend yields on Enbridge (TSX:ENB) stock, Firm Capital Mortgage Investment Corp. (TSX:FC), and Alaris Equity Partners Income Trust (TSX:AD.UN) today. Let’s have a look.
Firm Capital Mortgage Investment Corp
Inflation is getting contained and interest rate hikes have taken a breather in 2023. In response, the Bank of Canada might hold rates steady at current levels for longer as it waits for the full impact of record interest rate increases of 2022 to take full effect in the economy. These should be welcome developments for financial institutions with sizeable mortgage loan portfolios, as discount rates stabilize, mark-to-market losses disappear, and asset impairment risks stabilize.
Firm Capital Mortgage Investment Corp is a non-bank mortgage lender to the Canadian and United States markets. The lender is finding new short-term lending opportunities as conventional banks shy away from underwriting new mortgage loans in an unstable economic environment. It pays $0.078 per share in monthly dividends today, yielding a staggering 8.15% annually. You may wish to lock in the juicy payout as interest rates stabilize.
The lender has been growing its investment portfolio lately. Net income for 2022 increased by 7.5% due to higher interest income from a larger portfolio, and a significant increase in average portfolio interest rates from 7.9% by the end of 2021 to 10.9% last year
Impairment and fair-value losses have been minimal as Firm Capital Mortgage’s portfolio is mostly comprised of short-term loans. Going into 2023, about 68.3% of the portfolio was set to mature by year-end this year. Investors should expect manageable risks to the portfolio’s cash flows as rates stabilize.
Alaris Equity Partners Income Trust
Alaris Equity Partners Income Trust is a $785 million high-yield TSX dividend stock investors should take a keen interest in today. It provides capital to low-debt, cash-flow-rich non-cyclical businesses with growing moats in return for (largely) preferred dividends. Alaris stock pays a $0.34 per share quarterly dividend that yields a juicy 7.65% income-oriented investors shouldn’t miss out on.
Alaris’ annualized distributions for 2022 were nearly 4% higher than they were in 2021. The dividend is well covered by growing earnings and operating cash flow given a recent 39% cash flow payout rate for 2022. This was far below management’s conservative guidance for a payout rate of 65% to 70%.
The company reported a strong 29% surge in revenue in 2022 and 22% year-over growth in cash flow from operations. Revenue should grow in 2023 post a lucrative deal involving Body Contour Centers. The deal could earn the trust a lucrative 8.5% annual yield, and a rate reset of about 1.2% on preferred equity units resetting in 2023. Dividend coverage metrics could improve going forward, and Alaris’ share prices may steadily rise, reducing the current income yield.
Investors may hold Alaris shares as a core portfolio and potentially benefit from its stability. Shares have been resilient during the market shocks of yesteryear, giving promise that Alaris stock could perform well as a stable key holding in a retirement portfolio.
Enbridge stock
North American pipelines giant Enbridge is a $107.5 billion behemoth that generates massive cash flows from its stable “utility-like” oilsands and natural gas pipelines and gas distribution businesses with largely contracted cash flows. The company’s recent forward-looking thrusts into renewable energy make it an energy stock of the future. Investors who scoop up Enbridge stock’s quarterly dividend could lock in a respectable 6.7% annual yield for long-term passive income.
Enbridge’s multi-billion largely self-funded capital expenditure plans could generate 4%–6% annual growth in earnings per share and 3% annual growth in distributable cash flows between 2022 and 2025. In March, ENB’s management was confident enough to project an average 5% growth rate in distributable cash flows and earnings per share post-2025. The company’s balance sheet remains intact. ENB stock’s dividend could rise over the next decade given the success of its capital investment plans.
