Yahoo Finance TFSA Passive Income: Earn $100/Month in Dividend Payments
Written by Christopher Liew, CFA at The Motley Fool Canada
Most economies are flirting with recession if central banks remain firm on implementing more rate hikes to curb fast-rising inflation. Vanguard’s economic projections show a 50% probability of recession over the next 12-18 months. It said the odds have increased due to supply constraints of food and energy and other products and tight labour markets.
Higher costs of living and a prolonged inflation will surely hurt many consumers and households. If you’re a Tax-Free Savings Account (TFSA) user, now would be a good to time to catch up on your contributions if finances allow. The versatile investment account is the best place to hold income-producing assets like stocks, because all gains or interest inside a TFSA are tax free.
Also, earning passive income every month to boost your disposable income is possible. Most dividend payers on the TSX pay every quarter, although more than a handful pay monthly dividends. The top two picks in this select group trade at less than $50 per share, and the average dividend yield is 5.255%.
Assuming your available TFSA contribution room is $23,000 ($11,500 position in each), you can receive $100.72 dividend payments every month.
Pick No.1
Pembina Pipeline (TSX:PPL)(NYSE:PBA) is the top-of-mind choice for several reasons. Besides the generous dividend yield of 5.22%, the avenues and opportunities for future growth are vast. At $48.31 per share, this top-ranked energy stock is beating the market (+30% year to date).
The $26.81 billion company is a stalwart in North America’s oil and gas midstream industry. It derives revenue from three core segments, namely Pipelines, Facilities, and Marketing & New Ventures. In the second quarter (Q2) of 2022, Pembina delivered superb financial results.
Revenue growth versus Q2 2021 was 62.7%, while net earnings increased 64.6% year over year to $418 million. Pembina’s cash flow from operating activities was $604 million, or 3.4% higher than in the same quarter last year. On a year-to-date basis, total profit is $899 million, which represents a 56.6% growth from the first half of 2021.
Pembina has no problems generating robust cash flow from operating activities since the majority of cash comes from fee-based contracts. The cash flow it generates is more than sufficient to meet operating obligations and fund dividends and capital expenditures in the short term and long term.
Pick No. 2
Exchange Income Corp (TSX:EIF) is a top-performing industrial stock. Like Pembina, it’s faring better than the broader market (+16.7%) so far in 2022. The current share price is $47.64, while the dividend offer is 5.29%. Market analysts covering the stock are bullish. Their 12-month average price target is $61.22 — an upside potential of 28.5%.
The $1.91 billion diversified acquisition-oriented company relies on two core divisions to generate income. Its aerospace & aviation business and the manufacturing segment are the backbones of the company. In Q2 2022, revenue increased 64% versus Q2 2022. Notably, net earnings jumped 82% year over year to $29.99 million.
Carmele Peter, Exchange’s president, said, “While we will continue to experience challenges from pandemic supply chain impacts, rising fuel costs, labour shortages, and inflationary cost increases, we have proven that we are able to manage through these issues.”
Useful against inflation
The TFSA is a useful tool that Canadians can use to combat or cope with inflation. Consider maximizing your annual limit or available contribution room to produce tax-free passive income.
The post TFSA Passive Income: Earn $100/Month in Dividend Payments appeared first on The Motley Fool Canada.
Should You Invest $1,000 In Pembina Pipeline?
Before you consider Pembina Pipeline, you'll want to hear this.
Our market-beating analyst team just revealed what they believe are the 5 best stocks for investors to buy in August 2022 ... and Pembina Pipeline wasn't on the list.
The online investing service they've run for nearly a decade, Motley Fool Stock Advisor Canada, is beating the TSX by 27 percentage points. And right now, they think there are 5 stocks that are better buys.
See the 5 Stocks * Returns as of 8/8/22
More reading
Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool recommends PEMBINA PIPELINE CORPORATION.
2022
