Price swings or fluctuations are a universal risk in the stock market; no stock, regardless of sector, is insulated from headwinds. In Canada, dividend stocks are back in investors’ favour mainly due to the Bank of Canada’s rate-cutting cycle.
The Canadian Imperial Bank of Commerce said in August 2024 that money is plowing back into TSX dividend payers after the rate cuts in June and July. As of November 1, 2024, the central bank’s policy rate is down to 3.75% following a 25-basis points cut in September and a jumbo 0.50% reduction in October.
If you’re building a passive income portfolio or adding another income stock to your holdings, Chemtrade Logistics Income Fund (TSX:CHE.UN) is a sound choice. Besides a high yield, the stock pays monthly dividends. At $10.93 per share, the dividend offer is 6.04%. Also, current investors enjoy a 36.1% year-to-date gain on top of the generous payout.
If you buy 2,990 shares, the $32,830.20 investment will transform into $165.25 in monthly passive income. See the table below based on the given example:
| Company | Recent Price | No. of Shares | Div/Share | Total Payout | Frequency |
| Chemtrade | $10.98 | 2,990 | $0.6632 | $1,982.97* | Monthly |
*Total annual dividend payment; divide by 12 to get $165.25 monthly
Assuming you invest today and reinvest the monthly dividends, and do not pocket them, your capital will grow to $44,371.20 in five years due to the power of compounding. Your monthly dividends will become $223.34 after November 2029. The potential to earn higher monthly cash flow streams is ever-present if you can accumulate more shares.
Strong market position
Chemtrade is a $1.3 billion chemical manufacturer serving major industrial and consumer markets across North America and select countries. This diversified enterprise derives revenues from two core business segments. Investments in organic growth projects are ongoing to supplement growth. The 2024 growth capital budget is $60 million to $90 million.
The Sulphur and Water Chemicals (SWC) segment manufactures and markets sulphur-based products and services, water treatment chemicals, and specialty chemicals. Chemtrade’s Electrochemicals (EC) manufactures and markets sodium chlorate and chlor-alkali products, for which its electrochemicals plant in Brazil has a long-term contract.
Financial performance
Chemtrade recorded record Adjusted EBITDA in 2022 and 2023 amid an inflationary environment and high interest rates. Management aims to achieve another record, although it might be a tall order due to maintenance turnaround, significantly lower selling prices in the EC segment, and reduced profit in SWC.
In the first half of 2024, revenue and Adjusted EBITDA declined 8% and 18.4% year-over-year to $866.3 million and $225 million, respectively. Nonetheless, if Chemtrade hits the high end of its EBITDA guidance range in 2024, it would result in its three highest ever years for Adjusted EBITDA. The company anticipates the second half to be stronger than the first six months.
Distribution track record
Long-time Chemtrade investors can attest to the stock’s reliability as a passive income provider. While the yield varies depending on market conditions, the monthly payouts have been uninterrupted since August 2001. Management assures that the dividends are safe and sustainable (57.3% payout ratio) because of the defensive nature of the key products.
