1 Top Dividend Stock to Buy With $500

Waiting for your capital to hit a certain threshold before you buy a dividend stock might not be the best course of action, especially when good dividend stocks are on the mend.

| More on:
Target. Stand out from the crowd

Image source: Getty Images

When investing in dividend stocks for a passive income, most investors prefer to accumulate a large amount of capital before making a buy. However, while increasing your capital, you may start losing good yield opportunities. So, even if you only have access to a modest sum (like $500), you may consider grabbing one of the top stocks for dividends trading on the TSX right now.  

A pipeline giant

TC Energy (TSX:TRP) is one of the largest pipeline companies in Canada, with the bulk of its infrastructure leaning towards and most of its revenues coming from natural gas — the cleaner of the two major fossil fuels. Its natural gas pipeline network spans over 93,300 km, starting from Western Canada and going all the way to the U.S. East Coast. Some of its pipelines cover the full length of the U.S.

This network allows the company to transport about a quarter of the natural gas consumed in the North American continent, which is a significant and, hopefully, lasting edge. Even though the world is slowly moving away from fossil, natural gas might stick around longer than oil, giving it an edge over more oil-heavy competitors.

Its oil/liquid pipeline infrastructure is minimal by comparison, and it’s also growing its power generation infrastructure (4.2-gigawatt output capacity right now), about 75% of which is emissionless.

Dividend stock

There are two reasons why this energy stock is among the top dividend picks in Canada right now — discount and dividend history. It has been growing its payouts for well over two decades (22 years), making it one of the senior aristocrats in the energy sector.

The current payout ratio is not ideal, but it’s an improvement over the past few years. More importantly, its pipeline business model makes its revenues safer and more resilient than typical upstream and downstream energy companies.

The financial consistency allows it to keep rewarding its investors with generous dividends and healthy payout increases. But these are all its characteristic traits, relevant in almost all markets. What makes TC Energy a highly appealing stock right now is the 29% discount it’s trading at.

The discount has increased its yield to a very attractive number of 7.3%. So, even with just $500 in the stock, you would be able to generate about $36.5 a year. The valuation, while not low, is also at an attractive level.

Foolish takeaway

TC Energy is currently among the outliers in both the stock market at large and the energy sector in general, which has risen over 22% this year alone. But this doesn’t indicate a flaw in the stock, and it may also shield it from a correction that the energy sector faces after its magnificent post-pandemic bullish run that still continues (to an extent).

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

More on Dividend Stocks

A person builds a rock tower on a beach.
Dividend Stocks

CPP Pension: Boost Your Payouts by $5,232 per Year

You can raise your after-tax CPP by making RRSP contributions. Alimentation Couche-Tard (TSX:ATD) is a good RRSP stock.

Read more »

A close up image of Canadian $20 Dollar bills
Dividend Stocks

3 No-Brainer Stocks to Buy With $20 Right Now

Here are three no-brainer stocks that are suitable for anyone getting started on their investing journey.

Read more »

growing plant shoots on stacked coins
Dividend Stocks

3 Top Dividend Stocks That Keep Raising Their Payouts

These three TSX stocks are ideal buy as they consistently raise their payouts, depicting their healthy financials.

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

This 5% Dividend Stock Pays Cash Every Month

This monthly dividend stock offers cash every month, but also returns that continue to climb higher from being in a…

Read more »

Solar panels and windmills
Dividend Stocks

How Much Will TransAlta Renewables Pay in Dividends This Year?

TransAlta Corporation’s (TSX:TA) acquisition of TransAlta Renewables stock holds significant implications for income-oriented investors who previously held this monthly dividend…

Read more »

STACKED COINS DEPICTING MONEY GROWTH
Dividend Stocks

3 Stocks That Can Help You to Get Richer in the Next 5 Years

Consistent growth stocks with a relatively bright future are one of the most trustworthy ways to grow wealth.

Read more »

Dividend Stocks

3 Blue-Chip Stocks Every Canadian Should Own

These Canadian blue-chip stocks are backed by well-established businesses and a growing earnings base, enabling them to generate above-average returns.

Read more »

grow money, wealth build
Dividend Stocks

Is This 7.25%-Yielding Dividend Grower the Ultimate Income Stock?

This top Canadian dividend stock has increased the distribution annually for nearly three decades.

Read more »