Generating a steady, if not growing, passive income remains a long-term goal for investors everywhere. But finding the perfect TSX stocks to generate that income can be a daunting task for new investors.
Fortunately, the market is full of great options to meet that passive income goal. And given a cool $20,000, investors can generate a juicy $1,000 per year in passive income.
Here are the stocks to pick and why they belong in your portfolio.
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Option #1: Bank of Nova Scotia
You can’t mention compiling a list of TSX stocks to generate passive income without thinking about at least one of the big bank stocks. Bank of Nova Scotia (TSX:BNS) is the bank stock to add to that list.
As Canada’s most international bank, Scotiabank offers a striking balance between a stable domestic market to generate revenue and a growing international segment to fuel growth.
In recent years, that growth focus has shifted away from more volatile (albeit higher growth) markets in Latin America to more established markets in North America. The result is an increased focus on the U.S. and Mexico to drive that international growth.
And it’s working.
In the most recent quarter, Scotiabank reported net income of $2,518 million on an adjusted basis. That’s an impressive improvement over the $2,191 million reported in the same quarter last year.
The international segment was a solid part of that gain, posting $716 million in the quarter, reflecting a 7% year-over-year increase.
Those solid results help Scotiabank to continue investing in growth initiatives while paying out a very handsome quarterly dividend.
That dividend is a key reason why Scotiabank is one of the TSX stocks for passive income seekers. As of the time of writing, the bank offers a 4.7% yield, and Scotiabank has paid out that dividend for over 190 years without fail.
Adding to that appeal, Scotiabank has also provided investors with annual upticks to that dividend going back nearly three decades.
Dropping $10,000 into Scotiabank will return an income of just over $460. That’s not enough to retire on, but it is enough to generate a few shares each year through reinvestments alone.
Over a decade with some modest increases that snowball into nearly $600, all without investing another dime.
Option #2: Enbridge
Another example of one of the TSX stocks with passive income appeal is Enbridge (TSX:ENB). Enbridge is one of the largest energy infrastructure companies on the market with a diverse array of business segments.
The bulk of Enbridge’s revenue stems from its pipeline business, and for good reason. The segment, which includes both crude and natural gas elements, hauls massive amounts of both each day.
In fact, Enbridge hauls so much that the sheer volumes make Enbridge one of the most defensive picks on the market.
Specifically, the company transports one-third of all North American-produced crude across its network. Turning to natural gas, that number is one-fifth of the natural gas needs of the U.S market.
Impressively, the segment continues to grow and is just one of Enbridge’s business segments. In addition to its multi-billion-dollar project backlog, the company also boasts a growing renewable energy business and a natural gas utility.
Both generate a reliable and recurring revenue stream that, like Scotiabank, leaves room for growth and for its impressive dividend.
That dividend is the real reason that this TSX stock is beloved by passive-income investors.
As of the time of writing, Enbridge pays out a robust 5.57% yield. This means that a $10,000 investment will generate an income of $550.
Enbridge has also amassed three consecutive decades of annual increases and plans to continue that cadence.
In other words, Enbridge is a perfect buy-and-forget option for any portfolio.
TSX stocks for passive-income generation
Investing a combined $20,000 into Enbridge and Scotiabank can provide a steady, growing source of income for long-term investors. Here’s how that pans out.
| Company | Recent Price | No. of Shares | Dividend | Total Payout | Frequency |
| Bank of Nova Scotia | $95.00 | 105 | $4.40 | $462 | Quarterly |
| Enbridge | $68.25 | 146 | $3.77 | $550.42 | Quarterly |
| Total | $1,012.42 |
One or both of these stocks would do well in any well-diversified portfolio.
