How to Use Canadian Dividend Stocks to Build a Passive-Income Stream

You can easily create a reliable passive-income stream in Canada by investing in these attractive dividend stocks today.

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Have you ever thought of building a passive-income stream that can help you in difficult economic times? If yes, you’re not alone. As economic uncertainties have increased the market volatility lately, more investors than ever are considering creating a reliable source of passive income.

While having a source of reliable passive income might not make you super rich overnight, it has the potential to grow your wealth steadily in the long run and provide a safety net for your financial needs. Although there are many ways to generate passive income, dividend investing could arguably be one of the easiest and most flexible ones.

In this article, I’ll highlight two of the best Canadian dividend stocks you can buy in 2023 to build a reliable passive-income stream.

A reliable Canadian dividend stock for passive income

While new investors may find it difficult to pick the right stocks for their portfolio based on their risk appetite, it’s always wise to stick to fundamentally strong, large-cap stocks with proven track records of rewarding their investors with increasing dividends. This principle can help you filter out weak stocks that may increase your risk profile in the long run.

Keeping that in mind, Enbridge (TSX:ENB) could be one of the most attractive Canadian dividend stocks you can consider to earn passive income each quarter. The shares of this Calgary headquartered energy transportation have seen an 8% value erosion in 2023 so far to currently trade at $40.71 per share with $97.7 billion in market cap.

The recent decline in ENB stock could mainly be attributed to big declines in the prices of energy products, including crude oil and natural gas, in recent months amid fears of slowing global economic growth. At the current market price, Enbridge offers an attractive 7.3% annualized dividend yield and distributes its dividend payouts every quarter.

Besides its well-established oil pipelines and natural gas transmission business, Enbridge has advanced its strategy to increasingly focus on renewable energy and crude oil export businesses. Given that revenue-diversification strategy, you can expect its share prices to yield healthy returns in the long run and help you earn reliable passive income at the same time.

And a banking giant to invest in for passive income

Royal Bank of Canada (TSX:RY) could be another great dividend stock to consider to create a trustworthy passive-income stream in Canada. The Toronto-headquartered banking giant currently has a market cap of $167 billion, as its stock trades at $121.59 per share after declining by 4.5% on a year-to-date basis due mainly to the broader market weakness. RY offers an attractive 4.4% annual dividend yield at this market price.

While the ongoing macroeconomic uncertainty and challenging market environment have driven Royal Bank’s provisions for credit losses higher in recent quarters, its long-term dividend growth should largely remain unaffected by temporary challenges due mainly to its solid financial position and continued loan growth. That’s why I believe RY can keep posting strong financial growth in the coming years, which should help its stock inch up.

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.

The Motley Fool recommends Enbridge. The Motley Fool has a disclosure policy. Fool contributor Jitendra Parashar has no position in any of the stocks mentioned.

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