Did you know that the average Canadian could potentially earn over $1,000 in passive income annually just by maxing out their Tax-Free Savings Account (TFSA) with dividend stocks? That’s right! If you take advantage of the full TFSA contribution limit, which is now $7,000 for 2024, and invest in dividend stocks with a modest 4% yield, you could be pocketing a cool $280 per year, tax-free, on that contribution alone. Over time, as you reinvest those dividends and continue to max out your TFSA, that number can really start to snowball. So, here’s how to put it to work, while you barely lift a finger.
NPI stock
Northland Power (TSX:NPI) is a compelling option for those seeking monthly income on the TSX, especially if you’re a fan of steady, reliable dividends. One of the most attractive features of NPI is its forward annual dividend yield, currently sitting at a healthy 5.4% as of writing. This means that for every $100 you invest, you could expect to receive about $5.38 back in dividends over the year, paid out monthly! This kind of regular income is perfect for those looking to supplement their cash flow without having to sell shares.
Looking back, NPI has shown a consistent commitment to its dividend policy. Over the past five years, the average dividend yield has been around 3.8%, which reflects the company’s steady performance and investor trust. Although the stock has seen some volatility, its long-term commitment to paying dividends makes it a stable choice in a sometimes unpredictable market. Plus, with quarterly revenue growth at 12.2% year-over-year, NPI has shown it can continue to generate the income necessary to keep those dividends flowing.
Offering value
Currently, NPI’s valuation has several noteworthy aspects. With a forward Price/Earnings (P/E) ratio of 17.6, the stock is priced reasonably. Especially given its monthly income potential. However, it’s essential to note that NPI’s payout ratio is a whopping 500%, which might raise some eyebrows. This high payout ratio indicates that NPI is paying out more in dividends than it earns, which could be a concern if the company faces financial headwinds. However, with strong revenue growth and a solid cash reserve of $878.7 million, NPI seems well-positioned to manage its dividend commitments for now.
Looking ahead, NPI is focused on renewable energy projects, which could be a significant growth driver as global demand for clean energy continues to rise. This forward-thinking approach, combined with its existing portfolio, provides a strong foundation for future dividend payments. However, it’s important to keep an eye on the company’s debt levels, which are currently high with a debt-to-equity ratio of 166.5%. High debt can be a double-edged sword. It allows for expansion but can also strain the company’s finances, especially if interest rates rise.
Bottom line
Altogether, NPI offers an attractive option for monthly income, particularly if you’re looking to add a renewable energy play to your portfolio. The stock’s history of consistent dividend payments, combined with its current yield and future growth potential in renewables, makes it a strong candidate. In fact, here is what NPI stock could earn from that $7,000 investment.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | PORTFOLIO TOTAL |
| NPI | $21.83 | 321 | $1.20 | $385.20 | monthly | $7,000 |
Now you’ve got $385.20 annually, or $32.10 each month! However, potential investors should be mindful of the high payout ratio and significant debt levels, which add some risk to the otherwise promising income opportunity. So always balance the risk and reward before making any investment decision.
