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Passive income: it’s what we all want when we get into investing. Being smart with your money means finding ways to easily make money. And that’s exactly what passive income means. Yet it can still be quite difficult to find a strong balance between a share price and a dividend yield when looking at dividend stocks for passive income.
It’s a new world
The pandemic brought about a lot of changes, and it’s not over yet. The Omicron variant sent the TSX for a loop, bringing shares down. The TSX is only recently starting to see a rebound. Vaccination numbers are up, and the economy is trying to reopen around the world. And that means companies that were once black sheep are now looking mighty fine.
So, that’s the first key when it comes to looking for passive-income stocks. You need to find those that are still trading low and that have a solid long-term growth potential — especially when it comes to dividends. In fact, there are many that already boosted dividends after over a year of zero growth.
Furthermore, you need to find companies that will see an increase in revenue that could lead to dividend growth, but still trade low. If you can find these value stocks, then you’re likely to see incredible returns in your passive-income portfolio on top of dividends. So, let’s look at some options.
Find the industries
There are four areas that I’d like to look at, each with a strong passive-income stock to consider. First is oil and gas. Production came to a standstill during the pandemic and only now has seen prices start to jump. This jump has led many oil and gas producers and pipeline companies to increase their dividends. Enbridge (TSX:ENB)(NYSE:ENB) was one of them.
Enbridge stock increased its dividend by 3% and added a further $1.1 billion in growth projects to its portfolio. It already has stable long-term contracts to support dividends, but it plans on expanding to clean energy as well. With a P/E of 16.91 and dividend of 6.95%, it is a prime passive-income target.
Next up we have the banking sector. The Big Six banks were all on hold for dividend increases, but that’s come to an end. That includes Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM), which still boasts the highest yield, even after other banks bumped their dividends. CIBC increased its dividend by 10.3%, but you can lock in a 4.54% yield with a P/E of 10.19 right now.
Then there are asset managers like Brookfield Asset Management (TSX:BAM.A)(NYSE:BAM). These diversified property owners mean diversified income, and it’s why the company managed to remain fairly stable throughout the pandemic. The company reached record inflows of US$34 billion in the last quarter and still has a 0.90% dividend yield for investors.
And finally, royalty companies are another strong option. In this case, Diversified Royalty (TSX:DIV) is a cheap passive-income stock with a super-high dividend yield of 7.8%. That comes from its crazy cheap share price of $2.85 as of writing. Yet the company also increased that yield by 4.7% during its last earnings report.
Add it together
Combine all these passive-income stocks, and you can certainly bring in $1,000 per month. It will take a large investment, but here is how it might shake out.
- Enbridge: invest $47,485 to receive $4,000 in annual passive income.
- CIBC: invest $88,198 to receive $4,000 in annual passive income.
- Brookfield: invest $112,121 to receive $1,000 in annual passive income.
- Diversified: invest $38,863 to receive $3,000 in annual passive income.
Yes, that’s a grand total of $286,667 invested, and, of course, half of that is Brookfield, where you’ll get the least in dividends. This is consistent income, however, as this cash is certainly not going anywhere. And its returns are strong, so it’s a solid company to have in your passive-income portfolio. But, as always, do what’s best for you. If you want strong passive income, all four of these passive-income stocks offer that in spades.