Owning TSX stocks that have the potential to grow in value but can also generate significant passive income is an excellent strategy — one that’s becoming more and more popular.
Stocks that pay some of their earnings back to investors through a dividend ultimately have lower risk, because you receive a return on your investment each quarter or, in some cases, each month.
Furthermore, in tougher market environments, when stocks are struggling to gain value, the cash you can earn consistently can go a long way.
However, as popular as investing in dividend stocks has become, investors will often target the highest yields possible to earn as much cash as they can each quarter. And while that makes sense, it’s even more important to find stocks with reliable passive income and robust businesses that you can count on to continue paying you for years and even decades to come.
So, if you’re looking for smart TSX stocks to buy that can constantly generate passive income for you, here are two of the top companies to consider today.
A top TSX stock that’s increased its dividend for over 25 straight years
If you’re looking for top TSX stocks that can generate you significant passive income, one of the best to buy now is Enbridge (TSX: ENB): the massive $100 billion energy infrastructure stock.
Enbridge is a top choice for several reasons. First, it’s a massive company with significant competitive advantages that operates in an essential industry, making it highly defensive.
Plus, not only are its operations crucial to the North American economy, but its segments are all well diversified, which helps to lower the risk of the investment.
In addition, Enbridge owns many long-life assets that require little maintenance and earn the company billions in cash flow each quarter.
This makes it an ideal TSX stock to buy, as it’s constantly generating significant passive income each quarter. And not only does the stock offer a yield of roughly 6.7% today, but it’s also increased its dividend every year for over a quarter century.
Therefore, this strong and consistent dividend growth shows that Enbridge can provide you with years or even decades of growing passive income but also that the stock has one of the most reliable dividends on the TSX.
One of the best residential real estate stocks on the TSX for passive-income seekers
In addition to Enbridge, another top TSX stock to buy for passive-income seekers is Morguard North American Residential REIT (TSX: MRG.UN): a real estate stock with assets in Canada and across the United States.
Morguard is an ideal TSX stock to buy if you’re looking for passive income, especially since residential real estate is one of the most defensive industries there is.
Plus, not only does it operate in a defensive industry, but Morguard’s assets are also well diversified across many different regions, helping minimize risk significantly.
Furthermore, in the current economic environment, Morguard has actually seen a boost to its operations as a result of inflation. Unlike many parts of Canada, a lot of regions in the southern United States have much more affordable housing and rental prices which has given Morguard a significant runway to increase its revenue as costs have been rising.
In fact, in its U.S. portfolio, which accounts for over two-thirds of its net operating income, Morguard has seen its average monthly rent rise by more than 11% in the last year, and its same-property net operating income is up by more than 10% over that stretch.
Therefore, with Morguard having a tonne of potential to gain value and with the stock constantly generating passive income for investors every single month, it’s one of the top TSX stocks to buy now, especially while it still offers a yield of more than 4.2%.
So, if you’re looking for a top dividend stock to add to your portfolio today, there’s no question that a high-quality residential REIT like Morguard is one of the best to buy now.
