In this uncertain macro environment, having a stable passive income is a must. A passive income would help investors beat inflation and reinvest their regular payouts to earn superior returns. The Bank of Canada has lowered its benchmark interest rate by 225 basis points over the last 10 months to 2.75%. Moreover, economists are predicting another two 25-basis-point rate cuts this year. Given the low interest rate environment, investors should look to invest in monthly-paying dividend stocks with high yields to earn a healthy passive income.
Meanwhile, Canadian investors can avoid taxes by investing through their TFSA (Tax-Free Savings Account). Investors can earn tax-free returns upon a specified amount called the contribution limit. For this year, the Canadian Revenue Agency (CRA) has fixed the contribution limit of $7,000.
I assume that CRA will at least maintain the TFSA contribution limit of $7,000 in the coming years. If investors can grow their yearly TFSA contribution of $7,000 at an annualized rate of 14%, they can create a corpus of over $52,700 at the end of the fifth year. Meanwhile, if investors invest the above-stated corpus in monthly-paying dividend stocks that offer over 7% dividend yields, they can earn a monthly payout of over $300.
Meanwhile, let’s look at two TSX stocks that can deliver an average yearly return of above 14% over the next five years.
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Celestica
Celestica (TSX: CLS), which offers design, manufacturing, and supply chain solutions globally, is my first pick. Supported by its strong financial growth and exposure to the high-growth artificial intelligence (AI) sector, the company has delivered over 880% returns over the last three years at an annualized rate of 1.14%. In the recently reported first-quarter earnings, the company’s revenue and adjusted EPS (earnings per share) grew by 20% and 44.6%, respectively.
Meanwhile, I expect the uptrend in Celestica’s financials to continue amid rising investments in AI-related infrastructure, which could drive the demand for its storage and networking products. Further, the company also focuses on developing innovative products to meet its customers’ needs and strengthen its position. Amid its solid first-quarter performance and healthy growth prospects, Celestica’s management raised its 2025 guidance. The new 2025 revenue guidance represents a 12.4% year-over-year growth, while its adjusted EPS could increase by 28.9%. Considering its solid financials and healthy growth prospects, I expect Celestica to deliver oversized returns over the next five years.
Shopify
Another Canadian growth stock I am bullish on is Shopify (TSX: SHOP), which offers internet infrastructure to businesses worldwide to conduct and expand their operations. More companies are taking their businesses online, thus creating a multi-growth potential for Shopify. Further, the company has increased its R&D (research and development) funding to develop innovative products to meet the changing needs of its customers.
The company’s management has announced that it will focus on expanding its business-to-business, international, enterprise, and offline businesses this year. Further, the growing penetration of its payments system and geographical expansions could support its financial growth. Considering all these factors, I expect Shopify to deliver superior returns over the next five years.
Moving to monthly-paying dividend stocks, Whitecap Resources, SmartCentres Real Estate Investment Trust, and NorthWest Healthcare Properties REIT are some of the monthly-paying dividend stocks that currently offer over 7% dividend yields.
