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.

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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.

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