Canadian investors have no shortage of avenues to explore for using their money to create passive income streams. Stock market investing, specifically dividend investing, is an excellent strategy to generate perhaps the best returns for passive income-seeking investors.
Stock market investors focusing on dividend stocks for passive income often look to buy high-yielding dividend stocks. However, not every dividend stock is the same. For instance, some offer high yields but little to no growth. Others might boast low yields but a solid track record of increasing payouts for investors over the long run.
Good dividend stocks to generate a passive income are those that offer a generous yield that accompanies consistent growth. The best dividend stocks also have solid underlying businesses that can sustain and support reliable dividends. These are the kind of dividend stocks that can continue growing investor returns over the long run.
Against this backdrop, I will discuss two high-quality TSX dividend stocks that can be a valuable part of your self-directed portfolio.
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Bank of Nova Scotia
Bank of Nova Scotia (TSX: BNS) is one of the top picks for investors seeking reliable quarterly dividends. The $85.1 billion market-cap stock is one of the Big Six Canadian Banks. Also called Scotiabank, it is the third-largest among its peers. The multinational banking and financial services company is headquartered in Toronto and has a long history of delivering strong earnings. It also has a reputation for being a reliable dividend stock.
The bank boasts a solid balance sheet, a strong domestic and international presence in the banking sector, and the kind of diversified revenue streams to comfortably fund its growing dividends. Despite banks facing significant headwinds amid macroeconomic uncertainties over the years, Scotiabank remains resilient.
As of this writing, Scotiabank stock trades for $68.36 per share. Down by 14.7% from its 52-week high, it boasts an inflated 6.2% dividend yield that you can lock into your self-directed portfolio today.
Canadian Utilities
Many investors consider utility stocks as boring investments owing to the lower upward share price movement compared to most other stocks. However, the top utility stocks compensate for the lack of significant capital gains with reliable dividend growth. Canadian Utilities Ltd. (TSX: CU) is a high-yield stock with five decades of dividend growth, the longest streak for any TSX dividend stock.
Canadian Utilities is a $7.5 billion market-cap top-tier utility company with a history of stable cash flow and the dividend growth characteristics of companies in the utility sector. It operates in a highly rate-regulated industry, generating reliable revenue that can resist the impact of economic downturns. The defensive business can continue generating strong cash flows even in recessions because it offers essential services.
As of this writing, the stock trades for $36.76 per share and boasts a juicy 5% dividend yield that you can lock into your portfolio.
Foolish takeaway
If you’re looking for high-quality dividend stocks offering attractive yields and consistently growing payouts, Scotiabank stock and Canadian Utilities stock can be some of the best additions you can make to your self-directed investment portfolio. Adding the shares to your Tax-Free Savings Account (TFSA) can help you enjoy the dividend income without incurring taxes.
