Buy 119 Shares in This Dividend Stock for $1,083 in Passive Income

Looking for dividends and growth? This top stock offers both, and should continue to do so for at least the next year, if not far beyond.

| More on:
A woman shops in a grocery store while pushing a stroller with a child

Source: Getty Images

Canadian investors might start having a hard time finding deals. It was fairly easy if you were a long-term investor looking for a great deal in the last while. As long as you were patient, you knew that a strong dividend stock would rise back once interest rates came down. But now, interest rates are coming down. And deals aren’t so easy to find.

But those deals do exist, including for a top dividend stock like North West Company (TSX:NWC). NWC stock has seen its shares rise higher and higher over the last year, but still offers a deal thanks to its dividend and valuations. So let’s look at why investors might still want to consider this dividend stock, especially for top passive income.

Consistent earnings

The Canadian grocery and retail store operator has demonstrated consistent performance in its recent earnings reports, indicating potential for both growth and dividends. The company’s latest earnings report for the fourth quarter of 2023 showed a 6.7% increase in consolidated net earnings to $134.3 million compared to the previous year. Diluted earnings per share rose to $2.67 from $2.51, driven by higher earnings despite increased interest and income tax expenses.

Furthermore, NWC stock has shown resilience, rising after each earnings report over the past year. Despite a slight year-to-date decrease of 4.5%, the stock’s performance reflects strong fundamentals. Analysts currently have price targets ranging from $38 to $45, suggesting a possible upside of around 7% from its current price of approximately $42.

Valuable

Another bonus for NWC stock? Its financial health. The company’s financial health is underscored by its strong return on equity (19.8%) and a healthy debt-to-equity ratio (57.5). These metrics indicate efficient use of equity and manageable debt levels, which are favourable for both growth and dividend stability. 

Furthermore, North West has a dividend yield of about 3.8% as of writing, with a payout ratio of 56.8%, reflecting a sustainable dividend policy backed by solid earnings. Looking ahead, North West’s strategic focus includes expanding its presence in remote communities and enhancing supply chain efficiencies, which should support continued revenue growth.

Finally, the company’s price-to-earnings (P/E) ratio stands at approximately 15.2, indicating a reasonable valuation compared to the broader market and peers in the retail sector. So, with all that in mind, what could investors bring in from an investment in NWC stock?

Bottom line

In the last year, shares of NWC stock have risen by 18% as of writing. Let’s say this continues to happen in the next year. Add in that the stock also offers a dividend at 3.8%, amounting to $1.56 per share annually. Added together, let’s see how much passive income you could create in the next year from these same amounts.

COMPANYRECENT PRICENUMBER OF SHARESDIVIDENDTOTAL PAYOUTFREQUENCYPORTFOLIO TOTAL
NWC – now$42119$1.56$185.64quarterly$5,000
NWC – 18%$49.56119$1.56$185.64quarterly$5,897.64

You’ve now made returns of $897.40, as well as $185.64 in dividends. Together, that’s a total of $1,083.28 in passive income!

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 Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends North West. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Golden crown on a red velvet background
Dividend Stocks

Dividend Powerhouses: Canadian Stocks to Fuel Your Portfolio

These two top Canadian dividend aristocrats are some of the top stocks on the TSX to buy now and hold…

Read more »

Dial moving from 4G to 5G
Dividend Stocks

This Undervalued Dividend Stock is Worth Buying Right Now

Want an undervalued dividend stock with long-term potential and a juicy yield? Here's an option you may regret not buying…

Read more »

A worker gives a business presentation.
Dividend Stocks

1 Stock I’m Buying Hand Over Fist in July Despite the Market’s Pessimism

This top dividend stock is going through a rough patch, but don't let that count out all the growth we've…

Read more »

person on phone leaning against outside wall with scenic view at airbnb rental property
Dividend Stocks

2 TSX Stocks Poised to Have a Big Summer

Restaurant Brands International (TSX:QSR) stock and another darling that could be too cheap to ignore this summer.

Read more »

HIGH VOLTAGE ELECRICITY TOWERS
Dividend Stocks

Forget Fortis Stock: Buy This Magnificent Utilities Stock Instead

Looking for high dividends and returns? Then I'm sorry, but Fortis (TSX:FTS) stock probably isn't for you.

Read more »

Increasing yield
Dividend Stocks

2 High-Yield (But Slightly Risky) Stocks to Keep Your Eye on

Have these top TSX dividend stocks finally bottomed?

Read more »

Target. Stand out from the crowd
Dividend Stocks

2 Dividend Stocks I’d Buy if They Fall a Bit

Any near-term decline in these two top Canadian dividend stocks will make them look even more attractive.

Read more »

Pile of Canadian dollar bills in various denominations
Dividend Stocks

Got $3,000? 3 Dividend Stocks to Buy and Hold for the Long Term

You can buy these three Canadian dividend stocks with an investment as low as $3,000 right now and expect to…

Read more »