Shares of dividend-paying companies can be a compelling investment to start a passive-income stream. However, investors should take caution and consider Canadian stocks with strong financial health, stellar dividend payment and growth history, well-covered payout ratio, and management’s commitment to enhancing shareholders’ returns.
Moreover, one should focus on diversifying the income portfolio. This way, one can generate worry-free dividend income in all market conditions. With this backdrop, let’s delve into two fundamentally strong Canadian dividend stocks that can help you earn over $614/year with a $10K investment.
An energy stock
Investors seeking reliable dividend income stocks could consider Enbridge (TSX: ENB). The company that transports oil and gas is popular for its solid dividend payment history and management’s commitment to returning higher cash to its shareholders. Adding to these positives, Enbridge stock offers a high and well-protected yield.
For instance, this Dividend Aristocrat has paid dividends for over 69 years and increased it for 29 consecutive years. Meanwhile, this energy company offers a high yield of 7.5%.
Looking ahead, Enbridge’s continued investments in conventional and renewable energy projects will help the company capitalize on the energy demand and deliver solid distributable cash flow (DCF) per share. In addition, benefits from power-purchase agreements and regulated cost-of-service tolling frameworks will likely drive its earnings and DCF, supporting higher payouts.
Enbridge’s leadership expects its earnings and DCF to increase at a mid-single-digit rate in the long term. This will enable the company to grow its annual dividend at a similar pace in future years. Moreover, Enbridge maintains a target payout ratio of 60-70% of DCF, which is sustainable in the long term.
A bank stock
From the energy sector, let’s turn to top Canadian banks. These banks have been famous for paying dividends for more than 100 years, making them a dependable investment option for investors seeking passive income.
Among top banks, investors could consider investing in Bank of Montreal (TSX: BMO) stock. This financial services company has paid uninterrupted dividends for over 195 years, the longest dividend-paying corporation in Canada. Further, Bank of Montreal has increased its dividend at a compound annual growth rate (CAGR) of 5% in the past 15 years.
The financial services giant’s stellar dividend payouts are supported by its ability to deliver profitable growth. Its diversified revenue sources, high-quality loans, and solid deposit base drive its top line. Further, steady credit performance and operating efficiency cushion its earnings and drive its payouts.
Bank of Montreal expects its earnings to increase at a CAGR of 7-10% in the medium term, enabling it to grow its dividend at least at a mid-single-digit rate. Based on its closing price of $124.23 on April 26, Bank of Montreal stock offers a yield of 4.87%.
The bottom line
Enbridge and Bank of Montreal are reliable investments that generate consistent dividend income. The table shows that an investment of $5,000 in each stock can help you earn over $153.73 every quarter, or about $614.92/year.
| Company | Recent Price | Number of Shares | Dividend | Total Payout | Frequency |
| Enbridge | $48.96 | 102 | $0.915 | $93.33 | Quarterly |
| Bank of Montreal | $124.23 | 40 | $1.51 | $60.40 | Quarterly |
