Invest $10,000 in 2 TSX Stocks for $606/Year in Passive Income

Dividends are a solid source of passive income. Investors can rely on shares of fundamentally strong companies to start a worry-free passive income stream.

Thankfully, the TSX has several dividend-paying companies that have consistently paid and increased their dividends irrespective of market conditions. Further, these companies have resilient business models and a growing earnings stream, which implies that their payouts are well-covered, making them reliable income stocks.

Against this backdrop, let’s look at two Canadian stocks with solid financials, stellar dividend payments, and a growth history. Moreover, these companies have a well-covered payout ratio, and their management remains committed to enhancing their shareholders’ returns.

Against this backdrop, investing $10,000 in these two Canadian dividend stocks can help you earn over $606/year. Let’s delve deeper.

Enbridge

Investors seeking to generate passive income through stocks could rely on Enbridge (TSX: ENB). The company transports oil and gas and is popular for its solid dividend payment history. This energy company has uninterruptedly paid dividends for over 69 years. Moreover, the energy infrastructure company raised its dividend for 29 years at a compound annualized growth rate (CAGR) of 10%. Besides its stellar payouts, Enbridge stock offers a high and well-protected yield of 7.7% (based on the closing price of $47.50 on June 21). 

The company’s payment history shows its commitment to rewarding its shareholders with higher dividends in all market conditions. Enbridge’s resilient business model, highly diversified revenue streams, growing earnings base, and ability to generate solid distributable cash flows (DCFs) drive its dividend payments.

Enbridge’s high-quality infrastructure assets and investments in renewable and conventional energy sources will help the company capitalize on the growing energy demand. Further, the company’s high asset utilization rate, long-term contracts, power-purchase agreements, and multi-billion-dollar secured capital projects help drive its DCF per share and dividend payments.

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 to 70% of DCF, which is sustainable in the long term. 

Fortis

Like energy companies, utility sector stocks are famous for offering reliable dividends owing to their regulated asset base, defensive business model, and ability to generate predictable cash flows. Among top utility companies, Canadians could consider investing in Fortis (TSX: FTS) for its resilient payouts. Fortis boasts an uninterrupted dividend growth history of over 50 years. Moreover, it provides an attractive yield of about 4.5% near the current levels.

Fortis’ dividend payments are backed by its defensive business model, growing rate base, and predictable cash flows. Moreover, as Fortis generates all of its earnings from regulated utility businesses, its quarterly payouts are well-covered and can be relied upon.

Fortis focuses on growing its rate base through continued investment in regulated utility assets. This could help drive its future earnings and dividend payments. For instance, the utility company plans to grow its rate base by about 6.3% annually through 2028. It will enable Fortis to enhance shareholders’ returns through higher dividend payments. Fortis predicts its dividend to increase by 4 to 6% annually during the same period. 

Fortis’s low-risk business, growing rate base, stellar track record of dividend payments, and visibility over future payouts make it a worry-free stock for generating passive income. 

Bottom line 

Both Enbridge and Fortis stocks are dependable investments for earning worry-free passive income. The table shows that an investment of $5,000 in each stock can help you earn over $151.54 every quarter, or about $606/year.