This Dividend Aristocrat Could Be the Only Stock You Need for Passive Income

This dividend aristocrat just made a huge sale that has brought in billions in income. And that’s after being a top dividend payer for years.

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When it comes to passive income stocks, there are many on the TSX today to consider. However, one of the top choices remains those that are Dividend Aristocrats.

These stocks have increased their dividend each year for the last five years or more. And one of those companies is Great-West Lifeco (TSX:GWO).

After a recent sale, Great-West stock now looks like a major performer in the near future. Yet it’s also a strong passive income stock sitting in value territory. So let’s get into why it might be the only stock you need for passive income.

Gaining income through sales

Great-West stock has long been a strong company with a slew of financial services, including everything from insurance to investing. It operates mainly in the United States, Canada and Europe, though continues to keep its eye on ever-growing Asia.

While growth might be slow in the long run, according to analysts, it continues to maintain a focus on advice for wealth and asset management products, as well as investing in tools to attract more clients. The company also continues to hold the largest market position in Canada, yet it lately looks even more attractive.

This came after GWO stock sold its Putnam Asset Management poor performer to Franklin Templeton in a deal worth US$1.8 billion. The deal saw shares shoot up recently, providing renewed growth for those interested in the stock.

And passive income seekers should be.

Providing long-term passive income

The reason I get into all this before talking about dividends is to demonstrate there is room to grow for the company. Investors need earnings growth if they hope to have dividends remain in the near and distant future. In the case of GWO stock, that looks like almost a certainty.

GWO stock currently has a 5.5% dividend yield, which is higher than its 5.26% 5-year average. It also holds a stable payout ratio at 74.76% as of writing, with strong free cash flow at $7 billion to support dividend growth.

Its debt also remains low, with debt-to-equity at 35.5% as of writing. All taken into consideration, GWO stock looks like a great dividend payer. Especially while it trades at 14.3 times earnings, with shares up about 21% in the last year, as of writing. Furthermore, dividends have grown at a rapid rate, with the current compound annual growth rate (CAGR) for the last decade at 5.4%.

How much you could earn

Let’s say you wanted to invest $5,000 in GWO stock. You then left it alone, watching dividends climb over the next five years. Based on its CAGR, here is what your passive income could look like, not counting returns.

COMPANYRECENT PRICENUMBER OF SHARESDIVIDENDTOTAL PAYOUTFREQUENCY
GWO year 1$38132$2.08$274.56quarterly
2132$2.19$289.08quarterly
3132$2.31$304.92quarterly
4132$2.44$322.08quarterly
5132$2.57$339.24quarterly

At the end of five years, you could be making passive income from dividends alone of $339.24! And if you haven’t touched your passive income, that’s total income from dividends of $1,529.88 on top of your original $5,000 investment, without adding another penny.

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 Amy Legate-Wolfe 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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