Passive Income: How Much to Invest to Get $6,000 Each Year

Investing in quality high-dividend stocks can help you earn a passive-income stream for life. You need to identify companies that generate steady cash flows across business cycles, have sustainable payout ratios, and are armed with robust balance sheets.

Ideally, these dividend-paying companies should increase their earnings consistently, resulting in dividend hikes each year. Two such energy infrastructure TSX stocks with a high dividend yield are Pembina Pipeline (TSX: PPL) and Enbridge (TSX: ENB).

Let’s see how you can earn $6,000 in annual dividend income each year by investing in these two dividend stocks.

Pembina Pipeline stock

A Canada-based pipeline company, Pembina Pipeline, ended the third quarter (Q3) of 2023 with an adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $1.02 billion, an increase of 6% year over year. Its EBITDA grew due to growing volumes, rising utilization rates, and strong performance from its marketing business.

Pembina recently announced plans to acquire Enbridge’s remaining in the Alliance Pipeline, Aux Sable Pipeline, and NRGreen joint ventures for $3.1 billion. The acquisition will mean Pembina now has complete ownership of these natural gas assets, which should drive future cash flows higher.

The Alliance Pipeline is a natural gas transportation system operating in Canada and the United States. It spans 3,888 kilometres, ferrying natural gas from Western Canada to Chicago. The Aux Sable processing plant is located in Illinois and connected to the Alliance Pipeline and processes natural gas liquids from the pipeline.

Pembina Pipeline pays shareholders an annual dividend of $2.67 per share, indicating a forward yield of 5.8%. These payouts have increased by 11.2% annually in the last 17 years, which is exceptional for an energy company. Priced at 15 times forward earnings, PPL stock is not too expensive and trades at a discount of 12% to consensus price target estimates.

Enbridge stock

Among the most popular dividend stocks in Canada, Enbridge offers you a tasty dividend yield of 7.7%. A majority of its cash flows are tied to inflation-linked, long-term contracts, allowing Enbridge to raise dividends for 28 consecutive years.

It recently disclosed plans to acquire multiple gas utility businesses from Dominion Energy, which will drive earnings growth in the near term. To complete the acquisition, Enbridge raised $8 billion in debt and has secured $14 billion in total funding. The utility acquisitions are expected to close by the end of 2024, improving the resiliency of Enbridge’s cash flows.

In the last 20 years, Enbridge has returned 11% annually to shareholders, easily outpacing the broader markets. Despite these stellar gains, ENB stock is priced at 16 times forward earnings and trades at a discount of 12.8% to consensus price target estimates.

The Foolish takeaway

Investing a total of $90,606 distributed equally in the two TSX dividend stocks will help you earn $1,500 each quarter or $6,000 in annual dividends. If the companies raise dividends by 5% annually, your dividend income will double in the next 14 years.

However, investing such a huge sum in just two stocks does not make financial sense. You should identify other blue-chip TSX stocks and further diversify your dividend portfolio.