Generating a recurring stream of passive income can help individuals accelerate their retirement plans and achieve financial independence. But you first need to invest a certain sum of money to begin a steady passive-income stream.
One low-cost way to initiate your passive-income journey is by investing in blue-chip dividend stocks. Historically, quality dividend-paying companies generate profits across market cycles, allowing them to distribute a portion of these cash flows to shareholders.
Here are two blue-chip TSX dividend stocks you can consider buying right now.
What is the dividend yield for Enbridge stock?
Among the most popular dividend stocks in Canada, Enbridge (TSX:ENB) offers you a tasty yield of 7.7%. A slow-moving energy infrastructure giant, Enbridge has increased dividends by 10% annually in the last 28 years, showcasing the resiliency of its cash flows.
Enbridge expects to increase adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) by 4% in 2024, while distributable cash flow per share should rise by 3%, allowing it to raise dividends by 3.1% next year.
Enbridge deployed $3 billion toward acquisitions and invested $4 billion in capital projects in 2023, enabling it to drive future cash flows higher. It will also plough in US$14 billion to purchase three gas utilities from Dominion Energy, which should help it accelerate earnings growth in the near term.
Priced at 16 times forward earnings, ENB stock is quite cheap and trades at a discount of 10% to consensus price target estimates.
Is Toronto-Dominion a good dividend stock?
Another TSX giant, Toronto-Dominion Bank (TSX:TD) offers you a forward yield of almost 5%. Investors are cautious about bank stocks, as rising interest rates have led to a tepid lending environment in the last 18 months. There is also a risk of higher delinquencies by borrowers, forcing TD Bank and its peers to increase the provision for credit losses, lowering profit margins in the process.
But TD Bank has survived multiple economic downturns in the past, and its conservative lending policies have allowed it to maintain dividend payouts during the dot-com bubble, the financial crash, and the COVID-19 pandemic.
Despite a challenging macro environment, TD’s personal and commercial banking business in Canada increased revenue by 7% to $4.75 billion due to higher volume growth and margins. Priced at 10.5 times forward earnings, TD Bank stock trades at a discount of 9% to consensus price target estimates.
The Foolish takeaway
Investing a total of $95,250 distributed equally in the two TSX dividend stocks will help you earn $6,000 in annual dividends, translating to a monthly payout of $500. You need to identify a portfolio of quality dividend companies and diversify your investments, lowering overall risk.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| Enbridge | $47.68 | 999 | $0.915 | $914 | Quarterly |
| Toronto-Dominion Bank | $82.02 | 580 | $1.02 | $592 | Quarterly |
The amount you need to invest to earn $500 in monthly dividends actually depends on the forward yield of stocks. With an average yield of 5%, you will need to invest $120,000. But if you invest in high dividend stocks with an average yield of 8%, the investment amount reduces to $75,000.
Investors should consider investing in fundamentally strong companies with sustainable payouts instead of chasing stocks with sky-high dividend yields.
