Developing a reliable stream of passive income from stocks starts with owning great businesses. These businesses consistently grow their earnings per share and cash flows. Out of that, they can consistently increase their dividend rate as well.
For Canadians, there are a handful of quality dividend stocks that can steadily compound capital and passive income. Here are three of my favourite Canadian stocks for passive income today.
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AltaGas: A reliable stock for growth and passive income
AltaGas (TSX: ALA) is a premium Canadian stock for passive income. With a 2.4% dividend yield, it is not the highest-yielding dividend stock. However, that is a decent trade-off for the 109% gain that AltaGas stock has earned over the past five years.
The company has been executing a turnaround strategy very well. It has consolidated operations, sold off non-core operations, drastically reduced debt, and steadily increased its dividend at a 6% annual pace over the past five years.
AltaGas has great assets. It has a regulated natural gas utility business in the U.S. that is enjoying sector-leading growth. Likewise, its midstream and energy export business is booming. Middle East conflicts are pushing energy importers to find new supply from safer regions like Canada, and AltaGas is a major winner.
Many analysts believe AltaGas could exceed its guidance targets this year. New infrastructure projects coming online could further bolster earnings in 2027 and beyond. The company is targeting 5-7% annual dividend growth. This is a great stock for a mix of passive income, a resilient business model, and steady growth.
Topaz Energy: A solid energy stock with a growing passive-income stream
Topaz Energy (TSX: TPZ) is a different way to earn passive income and get exposure to energy. Its stock is up 92% in the past five years. This stock yields 4.3% right now.
Topaz owns a mix of royalty land acreage and energy infrastructure assets in Western Canada. While the company does have commodity exposure (it collects a piece of the production from its acreage), it doesn’t carry any of the risk of drilling or operating production assets.
Topaz is exposed to some very prolific energy production regions. This is supporting solid organic growth. It also gets to enjoy the upside from currently elevated energy prices.
Topaz has increased its dividend 10 times in the past six years. It has grown its dividend by an 11% compound annual growth rate (CAGR). If you don’t mind a bit more volatility (due to energy exposure), this is a great stock for passive income today.
Chartwell Retirement: A big tailwind and a growing dividend
Chartwell Retirement Residences (TSX: CSH.UN) is my last favourite stock pick for passive income. Its stock is up 55% in the past five years. It yields 3% today.
Chartwell is Canada’s largest retirement community provider. Canada is seeing a wave of baby boomers hitting retirement. Many baby boomers are looking to downsize their homes and seek all-inclusive living options. With over 95% occupancy, demand is elevated for its properties.
The problem is that the new supply is not keeping pace with the growing demand. This will continue to press rental rates higher and provide solid organic growth in the years ahead. Chartwell has been opportunistic to optimize its portfolio through smart acquisitions and non-core property dispositions. Developments could be another growth catalyst as well.
Chartwell has just resumed its dividend-growth policy with a 2% increase. Chartwell trades at a meaningful discount to U.S. peers, so it could enjoy an attractive re-rating given time.
