The Benefits of Investing in Canadian Dividend Stocks for Passive Income

Dividend stocks like TC Energy Corp. (TSX:TRP) can help churn out passive income and secure peace of mind for Canadians in 2023 and beyond.

| More on:
money cash dividends

Image source: Getty Images

Passive income is a type of unearned income that can be generated with very little labour. Examples of passive income include rental income, royalties earned from a book or another creative endeavour, or dividend stocks that pay out income in a standard portfolio. This sits in sharp contrast to active income, which comes from duties or services rendered according to an agreed task, like mowing the lawn or delivering someone a pizza.

Today, I want to discuss the benefits of passive-income generation with some of Canada’s top dividend stocks.

Passive income provides peace of mind and added security

This is one of the key benefits of a passive-income stream. Indeed, it is why the establishment of consistent passive income is such a milestone for the average investor. When you have a concrete passive-income stream, you can go about your day with the knowledge that you are accumulating cash.

More than peace of mind, passive income may grow into a necessity for many Canadians as cost of living has exploded in the first half of the 2020s. An active income stream alone may not provide the quality of life that Canadians have grown accustomed to. That should spur Canadian investors to establish passive-income streams with some of the top dividend stocks that are up for offer on the TSX right now.

Don’t sleep on this dividend stock that operates in the energy sector

TC Energy (TSX:TRP) is a dividend stock that can provide the kind of passive income that Canadian investors are hungry for. This Calgary-based company energy infrastructure company has proven to be a middle-of-the-road dividend payer in recent years. However, it does offer an enticing dividend yield.

Shares of this dividend stock have dropped 4.2% month over month as of early afternoon trading on May 17. The stock is up 1.8% so far in 2023.

In the first quarter (Q1) of fiscal 2023, TC Energy reaffirmed its financial outlook for the full year. It expects comparable earnings before interest, taxes, depreciation, and amortization to fall in the range of 5-7%. The company’s strong earnings growth should help support its dividend payout going forward. TC Energy last announced a quarterly distribution of $0.93 per share. That represents a very tasty 6.8% yield at the time of this writing.

One more Canadian dividend stock that will help you churn out passive income

First National Financial (TSX:FN) is a Toronto-based company that originates, underwrites, and services commercial and residential mortgages in Canada. This is the second dividend stock that I’d look to target for its passive-income generation past the midway point in May 2023. Indeed, this dividend stock offers a monthly distribution.

In Q1 2023, First National saw mortgages under administration increase 7% year over year to a record $133 billion. It achieved this growth in the face of significant macroeconomic challenges in the Canadian real estate space. Revenue increased 23% year over year to $432 million.

This dividend stock offers a monthly distribution of $0.20 per share, which represents a very strong 6% yield.

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 Ambrose O'Callaghan 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.

More on Dividend Stocks

dividends grow over time
Dividend Stocks

1 Magnificent Dividend Stock That’s Down 10% and Trading at a Once-in-a-Decade Valuation

This dividend stock may be down around 10%, but there is a huge future opportunity for those wanting growth as…

Read more »

Canada national flag waving in wind on clear day
Dividend Stocks

RRSP Must-Haves: 2 Canadian Stocks to Secure Your Future

The TSX’s dividend pioneer and first Dividend King are must-haves in an RRSP to ensure financial security in retirement.

Read more »

stock research, analyze data
Dividend Stocks

How Much to Invest to Get $500 in Dividends Every Month

TSX dividend stocks such as Enbridge, TD Bank, and Telus, can help you earn $500 in monthly dividend payments.

Read more »

Golden crown on a red velvet background
Dividend Stocks

Dividend Powerhouses: Canadian Stocks to Fuel Your Portfolio

These two top Canadian dividend aristocrats are some of the top stocks on the TSX to buy now and hold…

Read more »

Dial moving from 4G to 5G
Dividend Stocks

This Undervalued Dividend Stock is Worth Buying Right Now

Want an undervalued dividend stock with long-term potential and a juicy yield? Here's an option you may regret not buying…

Read more »

A worker gives a business presentation.
Dividend Stocks

1 Stock I’m Buying Hand Over Fist in July Despite the Market’s Pessimism

This top dividend stock is going through a rough patch, but don't let that count out all the growth we've…

Read more »

person on phone leaning against outside wall with scenic view at airbnb rental property
Dividend Stocks

2 TSX Stocks Poised to Have a Big Summer

Restaurant Brands International (TSX:QSR) stock and another darling that could be too cheap to ignore this summer.

Read more »

HIGH VOLTAGE ELECRICITY TOWERS
Dividend Stocks

Forget Fortis Stock: Buy This Magnificent Utilities Stock Instead

Looking for high dividends and returns? Then I'm sorry, but Fortis (TSX:FTS) stock probably isn't for you.

Read more »