Passive Income: How to Earn Safe Dividends With Just $20,000

Investors planning to build a passive-income portfolio with $20,000 could consider investing in top dividend-paying companies. Thankfully, several Canadian companies are known for their resilient payout history and growing earnings base, enabling them to reward their shareholders with worry-free distributions. Their reliable payouts make them attractive investments to earn safe dividends for decades.

Against this backdrop, here are top TSX stocks that are relatively less volatile, have fundamentally strong businesses, and offer reliable payouts. These companies can help investors generate relatively safe dividend income with as little as $20,000.

Canadian Utilities stock

Investors seeking to earn safe dividends could rely on leading Canadian utility stocks. These companies are known for their defensive business models and durable dividend payments. Utility companies’ rate-regulated assets enable them to generate predictable and growing cash flows that support their payouts in all market conditions.

Investors could add Canadian Utilities (TSX: CU) among the leading utility stocks for its exceptional track record of dividend growth. Notably, Canadian Utilities increased its dividend for 52 consecutive years. This is the longest dividend-growth streak by any publicly traded Canadian stock. Also, the company offers an attractive yield of over 5%.

Looking ahead, this utility giant will continue to increase its dividend at a healthy pace. The company’s highly regulated and contracted assets will likely generate reliable earnings year after year to support its payouts. Further, Canadian Utilities is investing multi-billion dollars to expand its regulated assets, which will drive its earnings and dividend distributions.

In the medium term, the company aims to invest about $4.6 billion to $5 billion in its regulated utilities, expanding its low-risk earnings base and supporting its quarterly payouts. Further, Canadian Utilities also focuses on enhancing its energy infrastructure assets, which positions it well for long-term growth. Overall, its high-quality earnings base, rate-regulated assets, stellar dividend-growth history, and resilient payout make Canadian Utilities a solid bet to earn worry-free income.

Enbridge stock

Enbridge (TSX: ENB) is another reliable stock to earn a relatively safe dividend. This integrated energy infrastructure company has paid and increased its dividends amid the COVID-19 pandemic when most companies operating in the energy sector either reduced or paused their payouts. This shows the resiliency of its payouts.

Notably, its diversified income stream, long-term contracts, and regulated cost-of-service tolling frameworks enable it to generate solid distributable cash flows (DCF), which cover its payouts. Given its growing earnings and DCF per share, Enbridge has uninterruptedly increased its quarterly dividend for 30 consecutive years. Moreover, it is on track to sustain its dividend-growth history.

The higher utilization of its assets, power-purchase agreements (PPAs), and commercial arrangements to lower commodity and price risk will support its DCF and payouts. Further, its highly contracted gas transmission and midstream operations, expansion of its renewable energy portfolio, and secured capital projects will drive its earnings and dividend distributions.

Earn $1,117 in passive income per year

Canadian Utilities and Enbridge are reliable stocks to create a robust passive-income portfolio and generate safe dividend income. The table below illustrates that investing $10,000 in each stock (a total of $20,000) can help you earn over $279.35 every quarter, or about $1,117.39/year.