Before we begin, I want to stress that when it comes to investing, dividends aren’t everything. Passive income comes from multiple sources, and that means returns. In fact, strong companies can provide a compound annual growth rate (CAGR) in the double digits year after year and have done so for decades! That can certainly be better than dividends.
That being said, if you want that assured passive income from dividends, there are companies that still offer strong returns. Today, let’s get to the best of the best of these five stocks.
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Banks
Let’s get one of the most obvious out of the way. Here in Canada, there is an oligopoly in the banking sector. Most Canadians use only about six banking institutions, which makes these companies big.
Royal Bank of Canada (TSX: RY) and Toronto Dominion Bank (TSX: TD) are the largest of the batch. Therefore, these are two banks that I would certainly consider for long-term passive income.
In the last 20 years alone, TD stock and RY stock have offered share growth of 268% and 362% respectively. Meanwhile, TD stock holds a 5.02% dividend yield, with RY stock at 4.12% as of writing. These banks have a history of market-beating performance, with decades of growth behind and ahead of them. So, these are certainly passive-income stocks to consider.
Financial institutions
Banks aren’t the only way to get in on financial institutions. Some others include companies that offer options beyond the banks. These can include investment firms and loan providers. Two I would look into are Power Financial (TSX: POW) and goeasy (TSX: GSY).
Power stock is a diversified international management and holding company with investments in a number of segments, including financial services. Shares of the stock are up 38% in the last 20 years, so it’s not as heavy-hitting as the banks. However, there is a stellar dividend yield at 6.18% as of writing.
goeasy stock offers a ton of growth as well. The loan and rent-to-own provider has seen massive growth in the last few years — all while offering long-term growth, having been around since the 1990s. Shares are up a whopping 1,367% in the last two decades, with a 2.65% dividend yield to boot. So, you might have yourself a huge passive-income winner here — even if return growth slows.
Real estate
Now, before you ignore this one, either because of the riskiness of the business, think again. Real estate investment trusts are one thing, but asset management in essential real estate is another.
That’s why Brookfield Asset Management (TSX: BAM) is another strong choice for passive income. The company is a global alternative asset manager with investments in real estate, infrastructure, renewable power, and private equity. The thing is, it can be a bit confusing looking at its share price.
The company has changed its name and re-listed several times on the TSX today. Even so, there has been steady growth from the stock over the years, going back all the way to 2001.
So, now, with a 3.81% dividend yield and shares up 20% since listing once again in 2022, BAM stock looks like another solid option for those seeking passive income.
