The Allure of Passive Income: Exploring Canada’s Top Dividend Stocks

Are you looking for passive income? Here’s a trio of Canada’s top dividend stocks that should be a part of every portfolio.

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Establishing a recurring income stream is one of the foremost goals of every investor. And while selecting those investments does sound daunting, it’s not that hard. There are plenty of great options that comprise Canada’s top dividend stocks that are worthy of consideration.

Here’s a look at some of Canada’s top dividend stocks and why they belong in your portfolio right now.

This stock has it all: Growth, income, and a defensive moat

Canada’s top dividend stocks come in all shapes and sizes. One such option to consider buying right now is Fortis (TSX:FTS). Fortis is one of the largest utility companies on the continent.

Utilities generate a stable and recurring revenue stream owing to their reliable business model. That business model is based on long-term, regulated contracts that span decades in duration.

That stability allows Fortis to provide a juicy dividend and invest in growth.

As of the time of writing, that dividend works out to a respectable 4.34%. It’s also worth noting that Fortis has provided annual upticks to that dividend for an incredible 50 consecutive years.

That fact alone makes the stock one of Canada’s top dividend stocks and a buy-and-forget candidate.

This big bank can provide a bigger income

I would be remiss if I didn’t mention at least one of the big banks as one of Canada’s top dividend stocks. And that bank to consider is Canadian Imperial Bank of Commerce (TSX:CM). CIBC is one of the smaller of the big banks, but don’t let its smaller size deter what could be a lucrative buy.

CIBC’s smaller international footprint means the bank has an added focus on its domestic operations. The bank’s larger mortgage book has made it a source of volatility over the past year as interest rates shot up. As a result, the stock is down nearly 10% over the trailing 12 months and nearly 30% over the past two years.

Despite that dip, CIBC remains a long-term option. And it’s that long-term appeal that investors should focus on. That dip has also swelled CIBC’s quarterly dividend to an attractive 6.71% yield, making it one of the better-paying options on the market.

Oh, and let’s not forget that CIBC has an established history, like its big-bank peers, of providing annual upticks to that dividend.

In other words, investors should buy this discounted bank now and hold onto what is one of Canada’s top dividend stocks for the long term.

Why bother with a rental property?

Establishing a rental property is one of the most popular ways to create an income stream. Unfortunately, it comes with a massive downpayment requirement, property taxes, countless repairs, and tenants.

Fortunately, there’s an easier way that comes thanks to RioCan Real Estate (TSX:REI.UN). RioCan is one of the largest real estate investment trusts (REITs) in Canada. The company operates a portfolio of over 190 properties across the country.

A growing number of those sites are mixed-use residential properties, and that’s where an opportunity lies.

RioCan’s mixed-use properties comprise residential towers sitting atop several floors of retail. The sites are located along high-traffic transit routes in major metro areas. In other words, they are high-demand units, making them appealing to would-be investors.

But what makes RioCan one of Canada’s top dividend stocks? That would be the juicy monthly distribution. As of the time of writing, RioCan offers a 6.04% yield.

To illustrate that potential income, let’s imagine a $40,000 investment in RioCan (as part of a larger, well-diversified portfolio). Would-be investors can expect to generate a monthly income of $200. Keep in mind that investment is considerably less than a typical downpayment.

Throw in the juicy yield, considerably lower risk, and not needing to worry about tenants, and you have a compelling investment option. The stock is also down year-over-year, making it a discounted buy now.

Buying Canada’s top dividend stocks today can be a gamechanger

All stocks, even the most defensive, carry some risk. And that includes the stocks mentioned above to some extent. Fortunately, the trio of stocks comprise a cross-section of Canada’s top dividend stocks, which offer juicy yields and defensive moats.

In my opinion, one or all of the above should be core holdings in any well-diversified portfolio.

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 Demetris Afxentiou has positions in Fortis. The Motley Fool recommends Fortis. The Motley Fool has a disclosure policy.

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