Need Passive Income: Turn $20,000 Into $1,000 Each Year

Investors looking to create a passive income stream for life can consider holding blue-chip dividend stocks. Historically, high dividend stocks have offered shareholders a low-cost way to create a regular stream of passive income.

But in addition to the dividend yield, it is essential to analyze a company’s ability to maintain and ideally grow these payouts across market cycles, enhancing the effective yield significantly. Here are three such quality TSX stocks you can buy and earn $1,000 each year in dividends.

Brookfield Infrastructure Partners stock

Brookfield Infrastructure (TSX:BIP.UN) owns and operates a portfolio of cash-generating assets across verticals such as clean energy, data centres, transportation, utilities, and energy. Part of a capital-intensive sector, BIP stock is down 29% from all-time highs, as investors are worried about rising interest rates and the higher cost of debt.

However, the pullback in BIP stock has increased its dividend yield to more than 5%. Moreover, BIP has raised the payouts for 14 consecutive years and aims to increase distributions between 5% and 9% annually going forward.

With a payout ratio of less than 55%, BIP has the flexibility to grow future cash flows by a combination of organic growth and accretive acquisitions.

Around 90% of its cash flows are regulated or tied to long-term contracts. Additionally, 80% of its cash flows are protected or indexed to inflation, making its dividend yield safe and sustainable.

Analysts remain bullish on the TSX dividend stock and expect shares to rise by roughly 45% in the next 12 months.

Bank of Nova Scotia stock

Canada’s banking sector is highly regulated, allowing the largest banks to benefit from entrenched positions. There are less than 40 domestic banks in the country, and the six largest banks dominate the Canadian market.

A consolidated market enables Canadian banks to enjoy pricing power and maintain a conservative lending approach and a strong balance sheet. While several banks south of the border were forced to lower and even suspend dividend payouts during the financial crisis in 2008, the six largest TSX banks could maintain these payouts with relative ease.

Recent interest rate hikes have driven shares of TSX banks lower, allowing investors to buy the dip and benefit from a high forward yield. For instance, Bank of Nova Scotia (TSX:BNS) is down 33% from all-time highs and offers shareholders a dividend yield of 6.74%, which is very juicy.

Priced at less than 10 times forward earnings, BNS stock is quite cheap and trades at a discount of 8% to consensus price target estimates.

Enbridge stock

The final TSX dividend stock on my list is Enbridge (TSX:ENB), which offers you a yield of 7.2%. An energy infrastructure company, Enbridge generates 98% of its revenue from long-term contracts and cost-of-service agreements.

Last year, the TSX energy giant disclosed its intention to acquire three natural gas utilities from Dominion Energy for US$14 billion, which should drive future cash flows higher.

With a payout ratio of less than 70%, Enbridge should continue to raise dividends while investing in organic growth projects. In the last 29 years, its dividends have risen by almost 10% annually.

The Foolish takeaway

Investors will need to allocate a total of $15,900 distributed equally in these three blue-chip TSX dividend stocks. If the payments increase by 10% annually, your dividends will double in the next seven years.