One of the easiest ways to start a sizable and minimal-effort passive income is to buy reliable, high-yield dividend stocks and stash them in your Tax-Free Savings Account (TFSA). The income generated within the TFSA is tax-free and accessible.
As for the stocks, selecting dividend aristocrats with stellar payout histories and leadership status in their respective industries (which lends them more credibility as stable picks) is the smart thing to do.
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A telecom giant
Telus (TSX: T) is one of the largest telecom companies in Canada and caters to a massive and diverse consumer base. The customer segments are quite similar to those of the other telecom giants in Canada, and Telus hasn’t even snapped the top spot in the 5G market in the country, but it has an edge that helps it stand out within the sector.
That edge is its business model and diverse business segments. While almost all telecom companies in Canada are spreading their target market beyond the obvious (wireless, networking, TV, etc.), Telus has already attained leadership status in multiple secondary markets.
This includes home security, smart home, and telehealth. It also has a sizable IT-focused subsidiary that may make it big thanks to its AI focus (though things aren’t going well for it, yet).
Despite these and other fundamental strengths (like healthy financials), Telus was dragged down by a weak sector (along with the other telecom companies) and is currently trading at around a 35% discount from its five-year peak.
The fall hasn’t done much to normalize its valuation, which is still relatively high (considering the price-to-earnings ratio of 42). However, it did beef up Telus’s yield to 7%, making it one of the most generous aristocrats in Canada right now.
An energy giant
Energy stocks are pretty well regarded among Canadian investors when it comes to high yield and decent dividend histories, but even in such a dividend-heavy sector, Enbridge (TSX: ENB) is in a class of its own. Not only does the company have one of the most potent dividend histories in the sector (29 consecutive years of dividend growth), but it’s also (usually) one of the most generous energy stocks in Canada.
Even now, when the stock has made a robust recovery from a deep correction phase and is already quite close to its five-year peak (and might surpass it in the coming months), the company is offering a juicy 6.4% yield.
Enbridge’s business – pipeline operations and natural gas utility (for the most part) – makes it significantly safer than most other energy companies. This adds another layer of security to its high-yield dividends.
Foolish takeaway
You can buy these high-yielding stocks practically any time and gain most of the same advantages but buying now can help you lock in solid yields for both stocks. Telus is still discounted and Enbridge is growing quite rapidly. If the growth continues for a longer than anticipated period, the yield may even be below the 6% mark, making the current 6.4% highly attractive by comparison.
