Craving Passive Revenue: Turn $22,110 Into a Monthly $151 Paycheque

Income investors can own a pair of high-yield dividend stocks and turn their capital into a monthly paycheque.

Publicly listed companies share or distribute a portion of their earnings to drive overall returns and keep shareholders loyal. But for most investors, dividend stocks provide a steady stream of passive income. However, those who want to align dividend earnings with their regular income turn to stocks paying monthly dividends.

High-yield stocks TransAlta Renewables (TSX: RNW) and Slate Grocery (TSX: SGR.U) pay monthly dividends and have an average dividend yield of 8.4%. Assuming you can purchase 1,000 shares each, the $22,110 total investment can become a monthly paycheque of $151.67.

Reinvest the dividends first and accumulate more shares to receive a hefty paycheque later.

CompanyPriceNo. of SharesDividend per ShareTotal PayoutFrequency
TransAlta$12.771,000$0.94$940Monthly
Slate Grocery$9.341,000$0.88$880Monthly

Stable, consistent returns

TransAlta owns and operates renewable and natural gas power generation facilities and other infrastructure assets. The 48 assets (combination of wind, hydro, and gas) or facilities have a total capacity of 3,211 MW. This $3.4 billion growth-oriented company operates in Canada, the U.S., and Australia but continues to look for acquisition opportunities beyond its core areas.

In Canada, TransAlta is one of the largest generators of wind power. Long-term contracts with strong counterparties provide stable cash flow, ensuring stable, consistent returns to investors. In Q1 2023, net earnings attributable to common shareholders rose 9.7% year over year to $45 million.

TransAlta commits to paying a significant amount of its cash flow available for distribution (CAFD) in the form of dividends. According to management, the objective hasn’t changed since the company went public in 2013. However, allocating most of its CAFD to dividends lessens the capital for growth opportunities.

Still, TransAlta is ready to meet the challenge and excited to play an important role in this decade’s massive clean energy expansion. Performance-wise, the stock is outperforming the TSX year to date, +17.24% versus +2.76%.

Attractive, resilient rental business

Slate Grocery (-13.1% year to date) trades at a discount or underperforms, but it doesn’t mean a weak business. This $561.7 million real estate investment trust (REIT) owns and operates 100% grocery-anchored real estate in the United States (24 states). Its resiliency stems from necessity-based tenancy (47%), primarily from supermarkets and grocery stores.

The top three tenants are Kroger, Walmart, and Albertsons. Its CEO, Blair Welch, said, “Against a backdrop of persistent inflation and rising rates, our grocery-anchored real estate continues to demonstrate its durability and ability to perform.”

In Q1 2023, rental revenue and net operating income (NOI) rose 30.3% and 23.8% year over year to US$50.8 million and US$39.8 million, respectively. Welch adds, “Demand for our high-quality, well-located spaces has driven strong leasing momentum in the first quarter, boosting occupancy and revenue growth within our portfolio.” The average portfolio occupancy of the 117 properties during the quarter was 93.7%.

Apart from the attractiveness of grocery-anchored properties, management said rental growth is embedded in the REIT’s portfolio. Expect Slate Grocery to pursue and actively underwrite buying opportunities that provide the best return to unitholders.

Formidable pair

TransAlta and/or Slate Grocery, a high-yielder duo, can satisfy investors’ craving for monthly passive revenue.

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool recommends Walmart. The Motley Fool has a disclosure policy.

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