Most income-focused investors look for companies that offer the best investment potential. Canadians are fortunate because there are plenty of choices in their backyard, specifically on the Toronto Stock Exchange.
If you’re taking positions in February, Chemtrade Logistics (TSX:CHE.UN) and Exchange Income Corp. (TSX:EIF) are superb options. Both companies are dividend leaders for three reasons: lucrative yield (average 5.3%), dividend sustainability, and monthly payouts. The common denominator is their diversified businesses.
An approximately $14,200 position in each today transforms into $125.13 in monthly passive income. The table below shows the earnings from the combined $28,400 investment.
| Company | Recent Price | No. of Shares | Dividend/Share* | Total Payout* | Frequency |
| Chemtrade | $10.20 | 1,392 | $0.58 | $812.15 | Monthly |
| EIC | $53.44 | 266 | $2.59 | $689.43 | Monthly |
*Amounts are annual; The total payout of $1,501.58 ($812.15 + $689.43) divided by 12 is $125.13.
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Growing demand
Chemtrade Logistics is well-known in North America for its industrial chemicals and two strategic business segments: Sulphur & Water Chemicals (SWC) and Electrochemicals (EC). The $1.3 billion company is the region’s largest sulphuric acid supplier. It also produces high-purity sulphuric acid for the semiconductor industry and provides industrial services such as processing by-products and waste streams.
The SWC business has 41 facilities in the U.S. and 12 in Canada, while the EC segment operates 3 facilities in North America and 1 in Brazil. Chemtrade’s business thrives, as evidenced by the improvement in its balance sheet in the 11 quarters. Notably, net debt dropped 50.5% to $811 million in September 2024 from $1.6 billion in 2019.
The growing demand for water treatment chemicals and semiconductors is a secular tailwind. Moreover, the diversified exposure to industrial and consumer end markets assures business growth and defensiveness. Regarding its dividend track record, this small-cap stock started paying dividends in 2012.
The Board-approved 5% dividend hike in January raised the yield to 5.7%. Management said the increase in cash distributions will not impede Chemtrade’s ability to execute growth initiatives and maintain a healthy balance sheet. At its recent share price, the trailing one-year price return is 22.5%-plus.
Positive momentum
Exchange Income Corporation also boasts a diversified business bannered by two business segments: Aerospace & Aviation and Manufacturing. The $2.6 billion acquisition-oriented company operates in niche markets and constantly seeks organic growth opportunities. Furthermore, it is now the largest medevac provider in Canada.
In late January 2025, the National Bank of Canada raised its price target for the industrial stock to $73 and kept an “outperform” rating. Besides the 36.6%-plus potential upside, investors partake in the 4.9% dividend yield.
“The third quarter performance was exceptionally strong, highlighted by our highest free cash flow and free cash flow less maintenance capital expenditures per share metrics and our second highest net earnings per share in our history,” said company CEO Mike Pyle.
Exchange Income’s $710 million in revenue, $56 million in net earnings, and $136 million in free cash flow (FCF) in Q3 2024 were all new records. Pyle expects the increasing inquiries due to subsiding inflation and rate pressures should convert to committed orders in 2025. He is also excited about the future of each of the businesses.
Robust passive income portfolio
Dividend leaders are suitable for Canadians intending to build a robust passive income portfolio. Money growth is also faster with Chemtrade and Exchange Income because you can reinvest dividends 12 times a year, not four.
