How to Build a Rock-Solid Passive Income Portfolio With $20,000

Create a defensive passive income portfolio with these top TSX dividend stocks.

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Canadian investors seeking a reliable passive income stream can use dividend investing to their advantage. To do that, you need to build a resilient self-directed portfolio of TSX dividend stocks, focusing on companies with solid fundamentals and underlying businesses capable of generating healthy cash flows.

To keep pace with inflation, there should also be an emphasis on prioritizing shares of companies with a consistent track record of providing investors with their shareholder payouts and dividend hikes.

It is necessary to understand that dividends are not a guarantee of income. To that end, it is important not to keep all your eggs in one basket and diversify. Considering these factors, we will look at three Canadian dividend stocks you can use to build the foundations of a solid passive income portfolio using $20,000.

Enbridge

Enbridge Inc. (TSX:ENB) is one of Canada’s largest energy infrastructure businesses, with an extensive pipeline network transporting a substantial portion of crude oil and natural gas used in North America. What sets it apart from many other energy companies is its reliance on generating cash based on the volume of commodities transported, as opposed to the value of them being hauled.

Its business model creates a defensive appeal for this dividend stock, allowing the company to provide consistently growing and generous dividend payouts to its shareholders. ENB has grown its payouts for almost 30 consecutive years. As of this writing, the energy stock trades for $47.70 per share and pays its investors at an inflated 7.67% dividend yield that you can lock in today.

Canadian Imperial Bank of Commerce

Canadian Imperial Bank of Commerce (TSX:CM) is one of Canada’s largest multinational financial institutions. Boasting a $59.4 billion market capitalization, it is one of Canada’s Big Six Banks. While 2023 was not a great year for Canadian banks, CIBC stock is well-positioned to withstand the macro headwinds and recession fears that have resulted in a decline in its share prices.

As of this writing, it trades for $63.80 per share, down by 22.7% from its 2022 all-time high.

While higher interest rates should help Canadian banks generate greater interest revenues, it opens the door to more loan defaults.

The interest rate hikes have ceased, and 2024 might see the Bank of Canada (BoC) enact rate cuts. If that happens, mortgage holders will more than welcome such a change. At current levels, CM stock pays its shareholders their dividends at a juicy 5.64% dividend yield.

Canadian Utilities

Canadian Utilities Ltd. (TSX:CU) is the first Canadian Dividend King on the TSX, having delivered dividend hikes for an incredible 51 consecutive years. Canadian Utilities stock is a $6.5 billion market capitalization company headquartered in Calgary, providing its customers with utility services.

The company generates most of its revenue through long-term and heavily regulated contracts. While it means the utility cannot deliver stellar wealth growth through capital gains in bull markets, it can hold its own during bear markets.

The stable revenue the company generates allows it to invest in growth initiatives and continue growing its dividends. As of this writing, it trades for $31.89 per share, paying its investors their quarterly dividends at a juicy 5.63% dividend yield.

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Foolish takeaway

These three TSX stocks are reputable dividend-payers and can be excellent building blocks for a resilient passive income portfolio. To help you understand how a hypothetical $20,000 invested equally into these dividend stocks can help you earn a quarterly income of around $300 through dividends alone, check out the table below.

CompanyRecent Share PriceNumber of SharesDividend Payout per QuarterTotal Payout per Quarter
Enbridge$47.70139$0.91$126.49
Canadian Imperial Bank of Commerce$63.80104$0.90$93.60
Canadian Utilities$31.89209$0.45$94.05
Prices as of 12/02/2024

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 Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends Enbridge. The Motley Fool has a disclosure policy.

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