Dividend investing and maintaining a dividend portfolio is worth it because it doesn’t require additional effort. If you have the capital to invest in dividend-paying companies, you have the opportunity to build a passive-income portfolio. The amount is relative, although $10,000 is decent foundation.
Reinvest dividends to accumulate more shares and live off them in the sunset years. Canadians are fortunate to have the best retirement accounts. Money growth is tax-free in a Registered Retirement Savings Plan (RRSP) and Tax-Free Savings Account (TFSA). The RRSP defers taxes, while the TFSA exempts earnings from taxes.
Regarding investment options and passive income sources in 2025, Crombie (TSX: CRR.UN) and PHX Energy Services (TSX: PHX) are ideal holdings in your RRSP and TFSA.
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National landlord
Real estate investment trusts (REITs) are eligible investments in an RRSP and TFSA. Crombie, a $2.6 billion REIT, has benefited from the Bank of Canada’s rate-cutting cycle and is appealing to passive income investors. At $14.12 per share (+8.05% year to date), the dividend is 6.3%, and the payout frequency is monthly.
Food retailer Empire Company Limited has a 41.5% ownership stake in the national retail property landlord. Crombie has inherent defensive qualities because its property portfolio consists primarily of grocery and pharmacy-anchored shopping centres. The grocery-anchored tenants account for 81% of the annual minimum rent (ARM).
Crombie’s portfolio stability stems from long-term leases, where the weighted average lease term (WALT) is 8.5%. For Empire, its anchor tenant (89% of retail properties), WALT is 10.8 years. The strategy for existing properties (non-major development) is to modernize and intensify. The 26 properties in the major development pipeline should drive future value creation.
In 2024, property revenue and net property income increased 4.3% and 5% year over year to $471 million and $301.7 million. Committed and economic occupancy rates in the fourth quarter (Q4) of 2024 were 96.8% and 96.5%, respectively.
Crombie’s collaboration with Empire is a competitive advantage because it can align real estate initiatives with the anchor tenant’s operational needs. Acquisitions, store conversions, modernizations, land-use intensifications, and development management services are mutually beneficial projects.
TSX30 winner
PHX Energy Services is a 2024 TSX30 winner, ranked 20th among Canada’s 30 top-performing stocks. If you invest today, the small-cap stock trades at $9.17 per share and pays a hefty 8.72% dividend (quarterly payments). The $417.3 million company provides horizontal and directional drilling services to oil and gas producers.
Market analysts see positive growth following the better-than-expected top-line growth in Q4 2024. The consolidated revenue of $178.7 million was the highest fourth-quarter revenue on record and the highest quarterly revenue in PHX’s history. However, earnings declined 57% year over year to $14.1 million.
In 2025, management’s goal is to improve profitability through high-margin businesses and internal efficiencies. Canadian operations, in particular, continue to experience higher activity levels in Q1 2025 and should produce strong results. Michael Buker, president of PHX, also foresees improved excess cash flow this year ($47.6 million in 2024).
Power of compounding
A combined $10,000 investment ($5,000 each) in Crombie and PHX Energy could grow substantially through the power of compounding. You’d have ample, recurring cash flow streams in the future. Given the 7.51% average dividend yield, your money will be approximately $43,585 in 20 years and receive $3,273.25 in annual passive income.
