One way to begin a low-cost passive-income stream is to invest in dividend stocks with a growing payout. In addition to consistent dividend income, investors are poised to benefit from capital gains, too.
Moreover, if held in a TFSA (Tax-Free Savings Account), both dividend income and capital gains are exempt from Canada Revenue Agency taxes. So, let’s see how you should structure $14,000 for a consistent TFSA income in 2025.
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Is this TSX dividend stock a good buy?
Valued at a market cap of $580 million, Diversified Royalty (TSX:DIV) is engaged in the acquisition of royalties from multi-location businesses and franchisors in North America. The company owns the Sutton, Mr. Lube + Tires, AIR MILES, Mr. Mikes, Nurse Next Door, Oxford Learning Centres, Stratus Building Solutions, and BarBurrito trademarks.
Diversified Royalty Corp. generates revenue through royalty payments from its royalty partners, based on a percentage of their system sales or a fixed payment. This allowed the company to distribute the majority of its cash flow to shareholders via dividends.
In 2025, Diversified Royalty is forecast to pay shareholders an annual dividend of $0.26 per share, which indicates a forward yield of 7.6%. Moreover, analysts forecast its free cash flow to expand from $46.4 million in 2024 to $63 million in 2028.
Given its outstanding share count, Diversified Royalty’s annual dividend expense is around $44 million, which indicates a payout ratio of almost 90%. A widening free cash flow should help Diversified Royalty to increase its dividends going forward.
Diversified Royalty leverages four key competitive advantages that include the following:
- Economies of scale that reduce per-unit costs as the royalty portfolio expands.
- Counter-positioning by targeting established brands seeking immediate capital from royalty monetization.
- High switching costs that lock in partners after initial transactions.
- Network effects where reputation attracts more deal flow. Growth drivers include same-store sales growth from existing partners, new royalty stream acquisitions, partner expansion, and sector diversification.
However, significant risks include dependence on partner performance, economic sensitivity affecting consumer-facing businesses, competitive pressures on partners, interest rate exposure on credit facilities, and reliance on partner management quality for sustained royalty payments.
A top TSX stock for your TFSA
Another TSX stock that offers you a tasty dividend yield is Mullen Group (TSX:MTL). Valued at a market cap of $1.2 billion, Mullen Group is a Canadian trucking and logistics company.
MTL is expected to pay shareholders an annual dividend of $0.84 in 2025, indicating a yield of over 6%. These payouts are forecast to rise to $0.92 per share in 2027.
In the second quarter of 2025, Mullen Group reported revenue of $540 million, an increase of 9% year over year, despite a sluggish macro environment, which showcases the effectiveness of its countercyclical acquisition strategy.
The Cole Group acquisition contributed $52.6 million in incremental revenue during just one month of ownership, while same-store sales remained relatively flat at $440.8 million. Management emphasized its strategy of pursuing acquisitions during economic downturns when opportunities arise at attractive valuations.
The company successfully closed a $400 million bond offering in July, providing over $100 million in available cash for future growth while extending debt maturity to 12 years. This positions Mullen for continued acquisitions and removes near-term refinancing risk.
