The current stock market environment is a blessing and a curse for passive-income investors.
The blessing is that prices (and valuations) for some of Canada’s most well-known dividend stocks have rapidly declined. As a result, new investors can earn dividend yields that have not been seen in many years.
The curse is that interest rates have rapidly risen. Interest rates tend to have a congruent relationship with the yield from a dividend stock. As rates rise, dividend stocks must compete with lower-risk assets like government bonds and GICs (Guaranteed Investment Certificates).
Consequently, prices go down, and yields go up. No one knows if this rate-rising cycle is over, so there is always the risk that rates could keep pressuring prices.
If you are a long-term investor and just want to buy good quality businesses (that also pay some decent passive income), here are three to consider buying with $30,000 today. This mini portfolio could earn as much as $1,400 of passive income per year.
An ultra-safe utility for passive income
Fortis (TSX:FTS) is about as safe as it gets when it comes to high-quality Canadian passive-income stocks. As a regulated transmission and distribution utility, Fortis has some of the safest assets in one of the safest sectors.
Fortis just announced a new five-year plan where it plans to grow its rate base by a 6% CAGR (compound annual growth rate) in that time. It will spend around $2.7 billion per year on low-risk projects to help achieve this growth.
The company continues to target 4-6% annual dividend growth. That would add to its already 50-year record of consecutive annual dividend growth.
Fortis stock is yielding 4.3% right now. A $10,000 investment in Fortis would earn $107.97 of passive income every quarter or $431.88 annually.
An energy stock with a great record of dividend growth
Another stock with a legacy of strong dividend growth is Canadian Natural Resources (TSX:CNQ). It has increased its annual dividend by a 21% CAGR for the past 23 years.
While it is a cyclical energy stock, the company has a portfolio of long-life, low-decline assets. It can produce positive cash flow at around US$40 per barrel. At US$85 per barrel, this stock has close to a 10% free cash flow yield.
It has over 40 years of reserves, which means it can deliver long-term shareholder value at only incremental cost.
CNQ stock yields 4% today. If you put $10,000 in Canadian Natural stock, you would earn $98.10 quarterly, or $392 annualized. Don’t forget, last year, it paid a special dividend, so if oil prices rise, there could be additional income upside.
A diversified utility for value and passive income
Brookfield Infrastructure Partners (TSX:BIP.UN) is a great way to collect passive income and get exposure to global trends like digitization, de-globalization, and de-carbonization.
Brookfield has a portfolio of high-quality assets with utility-like qualities. Its portfolio include utilities, energy infrastructure, crucial transportation assets, and digital assets like cell towers and data centres.
Most of its assets have long-term, inflation-indexed contracts. This just means that it can deliver solid earnings in almost any economic environment.
This stock is trading at its lowest valuation in almost five years. It yields 5.8% right now. Put $10,000 to work in BIP stock today, and it would earn $144.72 of quarterly passive income, or $578.86 annually.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| Fortis | $54.40 | 183 | $0.59 | $107.97 | Quarterly |
| Canadian Natural Resources | $91.19 | 109 | $0.90 | $98.10 | Quarterly |
| Brookfield Infrastructure Partners | $35.50 | 281 | $0.515 | $144.72 | Quarterly |
