Passive-income investors who aren’t chasing capital gains should look to some of the lower-cost income options that exist in today’s robust market.
Undoubtedly, in the long-term investing world, slow and steady really can win the race, especially when you consider the many euphoric momentum investors who may be at risk of surrendering their quick gains (and then some) in hot stocks and trends that are popular at any given point in time. From various cryptocurrencies to generative artificial intelligence and even obesity drugs (the GLP-1 plays), there’s no shortage of hyped investment themes to bet on.
If you seek high passive income and favour it over the potential for outsized capital gains, feel free to stay in your lane.
Who knows? You may end up being (mostly) spared come the market’s next big drop by opting for stocks and trades that aren’t so crowded.
Without further ado, let’s set our sights on two dividend stocks that currently boast juicy dividend yields north of 5%. Both Canadian financial stocks look cheap and ready to grow their payouts at a steady rate over the next five years and perhaps beyond that.
Power Corporation of Canada
Power Corporation of Canada (TSX: POW) isn’t exactly the type of stock you’d want to discuss among friends. It’s a major holding company that’s behind a wealth of financial service brands. Indeed, it’s a very boring Canadian financial that hasn’t really had a ton of action in the past +15 years.
At writing, shares of POW go for $37 and change, pretty much where they were way back in mid-2007, right before the Great Financial Crisis struck. Undoubtedly, it took quite a while for shares to rebound, but after an upbeat past year (shares rose nearly 9%), POW stock may finally be in for a breakout moment. It’s been a long time coming.
Even if POW stock is destined to go sidelines for longer, investors will have the opportunity to snag the 5.93% dividend yield. At 10.9 times trailing price to earnings (P/E), you’re getting a pretty steady cash cow for not all too high a price.
Great-West Lifeco
Great-West Lifeco (TSX: GWO) is an insurer that boasts a nice 5.17% dividend yield at the time of writing. At 14.5 times trailing P/E and recently eclipsed new all-time highs of around $45 per share, GWO stock seems to check all the right boxes. Momentum? Check. Bountiful and well-covered dividend yield? Check. Modest valuation? Check!
With the firm recently clocked in a phenomenal quarter alongside a generous 7% dividend increase, there’s never been a better time to give the nearly $40 billion insurer a second look. With new leadership changes in the books, it will certainly be interesting to see where the underrated Canadian financial heads are from here. My guess is higher highs could be in sight for the dividend-growth gem in the making.
Finally, with the 0.86 beta, shares of GWO are slightly less correlated to the TSX Index, making it a great way for income investors to dodge and weave past any future bouts of market volatility.
