Buy 2,852 Shares of This Super Dividend Stock for $222/Month in Passive Income

TransAlta Renewables Inc. (TSX:RNW) is a great dividend stock for Canadians who want to churn out big monthly passive income.

Ambrose O'Callaghan

Ambrose O'Callaghan graduated with a BA in Political Science from McMaster University. After that, he jumped into the banking world. He worked from the front line to an investment associate role. After that, he found a way to marry his experience and knowledge in the world of banking and finance to his love and passion for writing. Ambrose is a passionate believer in Warren Buffett's value investing model.

Published May 14, 2023 10:45 am EDT

There are many ways to collect passive income available to Canadians. Some of the ways you can get passive income includes through rental income, royalties from a creative endeavor like a published book, revenue generated from a YouTube channel, and many others.

Today, we are going to focus on churning out passive income in our investment account. In this piece, we are going to rely on TransAlta Renewables (TSX: RNW) as the super dividend stock that will be the centrepiece of our passive-income portfolio. When we are finished, we will be able to rely on monthly passive income of $222 going forward.

dividends grow over time — Source: Getty Images

One reason to build a passive-income portfolio right now

Canadian investors have been forced to battle market volatility in April and early May. Moreover, consumers are being squeezed by high inflation and interest rate hikes. These are the times when a roaring bull market would be more welcome than ever. Unfortunately, the S&P/TSX Composite Index has still failed to recover from the losses it incurred in the spring of 2022.

Instead of betting on capital growth in this uncertain period, I’d prefer to snatch up a dividend stocks that can help us build consistent passive income. Better yet, I want to build this portfolio in a Tax-Free Savings Account (TFSA). That means the passive income we generate will be entirely tax free.

Why I’m targeting this super dividend stock for the long term…

TransAlta Renewables is a Calgary-based company that owns, develops, and operates renewable and natural gas power-generation facilities and other infrastructure assets in Canada, the United States, and Australia. Shares of this dividend stock have dropped marginally month over month as of close on May 9. The stock is still up 7.9% so far in 2023.

This company released its first-quarter (Q1) fiscal 2023 earnings on May 5. In Q1 2023, TransAlta saw revenues fall to $119 million compared to $143 million in the previous year. Meanwhile, net earnings attributable to shareholders rose to $45 million, or $0.17 per share, over $41 million, or $0.15 per share, in the first quarter.

TransAlta Renewables encountered headwinds in Q1 due to lower wind resources, higher unplanned outages in U.S. wind and solar as well as decreased water resources. This was partially offset by improved results at its Windrise wind facility.

Here’s how you can churn out big passive income with this dividend stock

This top dividend stock closed at $12.27 per share on Tuesday, May 9. For our hypothetical, I will look to snatch up 2,852 shares of this dividend stock for a purchase price of $34,994.04. TransAlta Renewables offers a monthly distribution of $0.078 per share. That represents a very tasty 7.6% yield. This means that we will be able to generate tax-free passive income of $222.45 per month. Moreover, that translates to annual passive income of $2,669.47 in our hypothetical TFSA.