Have you received a windfall amount, maybe a bonus, or have you cashed out a growth stock, and now you have $15,000? Perhaps you are worried about splurging this amount on things you don’t need. It often happens that our impulsive spending puts savings for the future on the back burner. But this annual bonus can add an extra $109 to your paycheck from next month onwards, and it will keep coming for years and grow with inflation. And this is while your $15,000 remains safe, with a 20-25% upside.
Three income stocks to buy in March 2024
Dividend yield: annual dividend per share/stock price.
When the stock price falls or the dividend increases, the yield increases. Now is the time to buy three income stocks while the stock prices are low. Buying the dip can help you lock in a higher yield and give you capital appreciation in the recovery rally.
Enbridge stock
Enbridge (TSX: ENB) is an evergreen dividend stock you can buy anytime. It is a range-bound stock, trading in the $42-$57 range. You could consider buying it below the $50 price and be assured of the dividend payout. Enbridge has been paying a dividend for over 69 years and has grown it consistently for 29 years. That was possible because of its low-risk model. It uses the toll money and some debt to build new pipelines, acquire existing ones, and maintain its old pipelines. This reinvestment helps it earn more cash flow.
After setting aside cash for capital spending and debt payments, it arrives at distributable cash flow (DCF). Even in DCF, it only pays 60-70%, keeping a buffer. As the DCF increases, dividends increase. Enbridge expects to grow its DCF by 3% annually up to 2026 and then onwards by 5%. This slowdown in dividend growth comes as Enbridge is investing heavily in gas pipelines. If you buy the stock now, you can get a higher yield in the future.
In 2024, its annual dividend per share is $3.66 (7.5% yield). If we add a 3% growth till 2026 and a 5% growth in 2027, its annual dividend per share could be $4.07 by 2027 (8.3% yield if you buy the stock today at $48.81).
BCE stock
BCE (TSX: BCE) stock is in between several moving points. There is the rising interest expense, reducing its DCF. It is cutting 4,800 jobs as part of business restructuring. That’s a huge one-time severance pay that will lower its 2024 net profit. There is also an ongoing policy dispute that requires BCE to give independent competitors access to its fibre network, in which it has invested billions. All this has pulled the stock down to its multi-year low of $46.5, inflating its yield to 8.58%.
There are concerns about whether BCE can sustain its 2024 dividend per share of $3.99, which is 3% above 2023. Its 2023 dividend-payout ratio was 111%. In the worst-case scenario, the telco may pause dividend growth for a few years till the dust settles and it starts realizing the benefits of restructuring and 5G network infrastructure.
While there is a risk, there is also ultra-high yield. Plus, there is a high possibility of a 40% capital appreciation if the stock returns to its normal trading price of $65.
Slate Grocery REIT
Slate Grocery REIT (TSX: SGR.UN), a real estate investment trust, is at a sweet spot with an 81.1% payout ratio and no dividend growth. Its unit price has dipped because of weak property prices, inflating its yield to 10.25%.
Bottom line
| Details | Enbridge | BCE | Slate Grocery REIT | Total |
| Stock Price | $48.81 | $46.50 | $11.41 | |
| Annual Dividend Per Share | $3.66 | $3.99 | $1.17 | |
| Invested Amount | $5,000.00 | $5,000.00 | $5,000.00 | $15,000.00 |
| No. of Shares | 102 | 107 | 438 | |
| Annual Dividend | $373.32 | $426.93 | $512.46 | $1,312.71 |
| Yield | 8.75% |
An equal investment in the three stocks in March can help you build a diversified passive-income portfolio with an 8.75% yield.
