It’s been a tumultuous past two weeks for investors, to say the least. The Canadian stock market as a whole had been trading mostly sideways for the year. That is, until the start of April. Through the first week of the month, the S&P/TSX Composite Index had dropped a staggering 10%.
As tough as it’s been as of late, though, now could be an opportunistic time to put some money to work in the Canadian stock market. There’s no shortage of high-flying growth stocks trading at huge discounts. If passive income is what you’re after, there are plenty of 5% (and higher) dividend yields to choose from.
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Using a TFSA to build a passive-income stream
The Tax-Free Savings Account (TFSA) is an excellent choice for a long-term investor loading up on stocks.
One of the key selling points of the TFSA is that gains and dividends are not taxed. This means investments can compound year after year without the need to pay any tax at all.
In addition, withdrawals can be made at any point in time — once again, completely tax-free. This makes the TFSA a great choice for building a stream of passive income, as investors can withdraw their dividends as they please.
With that in mind, I’ve put together a well-rounded basket of three top Canadian dividend stocks.
Stock #1: Brookfield Infrastructure Partners
During times of volatility, you’ll be glad to own a trustworthy utility stock like Brookfield Infrastructure Partners (TSX: BIP.UN).
In addition to the passive income, Brookfield Infrastructure Partners’s defensiveness can also help soften the blow of volatility in an investment portfolio. This is especially true if your portfolio is over-indexing to growth stocks.
At today’s stock price, Brookfield Infrastructure Partners’s dividend is yielding an impressive 6%.
Stock #2: Northland Power
After a disappointing past several years, growth investors might be ready to give up on the renewable energy sector. Passive-income investors, however, shouldn’t overlook this beaten-down space.
Shares of Northland Power (TSX: NPI) are down more than 50% from all-time highs, which we last set in early 2021.
One silver lining is that the dividend yield has shot up with the recent skid. At today’s stock price, the yield is just shy of 6.5%.
As a long-term renewable energy bull, I’d bank on the market-beating gains to return at some point. And in the meantime, there’s plenty of potential passive income to earn.
Even if you are a growth investor, as long as you’re willing to be patient, I’d say there’s a ton of value up for grabs in the renewable energy sector.
Stock #3: Royal Bank of Canada
If you’re looking to build a dependable stream of passive income, the Canadian banks are a great place to start. The Big Five not only have some of the highest yields on the TSX but also own some of the longest payout streaks.
Royal Bank of Canada (TSX: RY) isn’t the highest-yielding, nor does it have the longest payout streak among its peers. It is, however, the largest company on the TSX.
What investors get when they purchase shares of Canada’s largest company is dependability. You don’t need to think twice about loading up on this bank stock, which is currently yielding just shy of 4%.
