Investing in blue-chip dividend stocks should help you create a passive-income stream for life. Generally, quality dividend-paying companies generate cash flows across business cycles, allowing them to maintain payouts in good times and bad. Further, a widening earnings base allows them to consistently raise dividends, enhancing the effective yield over time. Here are two such TSX dividend stocks that could create $1,000 in passive income in 2024.
Capital Power stock
Valued at $4.9 billion by market cap, Capital Power (TSX: CPX) generates stable and growing cash flows from a contracted and merchant power-generation portfolio supported by an investment-grade credit rating. It generates 9,300 megawatts of power at 32 facilities across North America.
The company aims to create and enhance shareholder value by generating power from efficiently operated plants. Capital Power pays shareholders an annual dividend of $2.46 per share, indicating a forward yield of 6.4%.
In the first quarter (Q1) of 2024, Capital Power reported an adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $279 million and adjusted funds from operations (AFFO) of $142 million, or $1.15 per share. Comparatively, it pays shareholders a quarterly dividend of $0.615 per share, indicating a payout of 53.5%, which is sustainable.
A low payout ratio offers Capital Power the flexibility to reinvest in organic growth, target acquisitions, and reduce balance sheet debt, all of which should drive future cash flows and dividends higher.
Capital Power aims to end 2024 with an AFFO between $770 million and $870 million, indicating it trades at a forward AFFO multiple of just six times, which is very cheap.
Due to its attractive valuation, analysts remain bullish on CPX stock and expect it to surge over 10% in the next 12 months.
Bank of Nova Scotia stock
Another TSX dividend stock is Bank of Nova Scotia (TSX: BNS), which offers a yield of 6.4%. With a market cap of $80 billion, BNS is among the five largest banks in Canada.
In fiscal Q1 of 2024 (which ended in January), BNS reported adjusted earnings of $2.2 billion, or $1.69 per share. The company explained that strong revenue growth, coupled with disciplined cost performance across businesses, allowed it to improve profitability despite higher credit provisions.
BNS ended Q1 with a CET1 (common equity tier-one) ratio of 12.9%, which is in line with peers. The CET1 ratio showcases a bank’s ability to withstand an economic downturn, and a higher multiple is favourable. Moreover, the company’s liquidity coverage ratio strengthened to 132%, lowering its reliance on market-source funding.
As interest rates move lower, demand for loans across verticals should rise in the next 12 months, boosting BNS’s revenue and profit margins.
Priced at 10 times forward earnings, BNS stock is quite cheap and trades at a discount of 4% to consensus price target estimates.
The Foolish takeaway
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| BNS | $65.91 | 118 | $1.06 | $125 | Quarterly |
| Capital Power | $38.21 | 205 | $0.615 | $126 | Quarterly |
Both Capital Power and Bank of Nova Scotia offer shareholders a similar dividend yield. So, to earn $1,000 in annual dividend income, you invest a total of $15,650 distributed equally in these two stocks. In case the companies increase dividends by 7% annually, your payout will double in the next 10 years.
