Retire Early With These 3 Canadian Passive-Income Stocks

Three Canadian passive-income stocks are smart choices for people with early retirement goals.

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There are no obstacles to retiring early, provided you save early, invest in passive-income stocks, and reinvest the dividends to grow your retirement fund over time. The wise investment choices to help accelerate your retirement date are Bank of Nova Scotia (TSX:BNS), Pembina Pipeline (TSX:PPL), and Transcontinental (TSX:TCL.A).

Besides the high dividend yields, the three Canadian stocks are Dividend Aristocrats. The big bank and pipeline operator have raised their dividends for 11 and 10 consecutive years, respectively, while the industrial stock has a dividend-growth streak of 20 years.  

Outstanding dividend payment history

BNS is a no-brainer passive-income provider. The $76.45 billion financial institution is Canada’s fourth-largest lender. This Dividend Aristocrat’s dividend track record dates back to 1832, meaning the payment history is 191 years old. If you invest today ($63.43 per share), the dividend offer is 6.57%.

In the third quarter (Q3) of fiscal 2023, revenue rose 4% to $8.09 billion versus Q3 fiscal 2022. However, net income declined 15% year over year to $2.21 billion, as provisions for credit losses (PCL) jumped 99% to $819 million from a year ago. Still, its chief executive officer (CEO), Scott Thomson, said the results indicate stable earnings amid economic uncertainty.

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BNS recently announced extending its long-standing strategic agreement with Chase Payment Solutions, the merchant acquiring business of JPMorgan Chase. The partners will provide Canadian businesses an integrated and scalable payment experience, including payment processing and cash-management services. It should also accelerate the shift towards online commerce.

Visible growth runway

Pembina Pipeline operates an integrated network of hydrocarbon liquids and natural gas pipelines. Apart from the pipeline network, the $22.27 billion energy transportation and midstream services owns gas gathering and processing facilities and oil & natural gas liquids infrastructure. The allied businesses are logistics services and export terminals.  

In the first half of 2023, revenue and net earnings declined 29% and 19% year over year to $4.36 billion and $732 million. Nevertheless, management expects to capture new volumes and report volume growth for the second half of the year after the pipeline system outage and wildfires. Pembina should also benefit from increasing asset utilization and growth projects. The current share price is $40.56.

Leader in flexible packaging

At $12.11 per share (-16.91% year to date), Transcontinental trades at a discount but pays a juicy 7.48% dividend. The $1.04 billion company derives revenue from two core segments: Packaging and Printing Sectors. Because of lower volumes and softening demand, the business encounters rough sailing.

Transcontinental’s president and CEO, Thomas Morin, said the continuing investments to commercialize sustainable packaging solutions should drive long-term growth. However, he anticipates volume reduction and inflationary pressure to impact the operating earnings of the printing sector.

Still, management remains upbeat and optimistic about the business. Transcontinental expects to generate significant cash flows from operating activities, reduce net indebtedness, and continue with its strategic investments.

Pre-eminent choice

While the three Canadian passive-income stocks are Dividend Aristocrats, BNS is the preeminent choice. You need stability if you have early retirement plans or goals. The big bank is well capitalized, and its dividend payouts are never in doubt.   

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.

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool recommends Bank Of Nova Scotia, JPMorgan Chase, Pembina Pipeline, and Transcontinental. The Motley Fool has a disclosure policy.

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