Yahoo Finance Want to Earn $2,000 in Annual Dividend Income? Invest $32,500 in These 3 Stocks
Written by Aditya Raghunath at The Motley Fool Canada
Individuals and households should aim to create multiple income streams, given the global economy remains uncertain and challenging. Investing in real estate and renting the properties out to tenants was historically the go-to option for households. But the Canadian property market refuses to cool down amid headwinds such as rising interest rates and inflation.
For instance, the average selling price of a single-family home in Toronto rose by 1.5% to $1.31 million in February 2024. Most potential homeowners would have to fund this purchase with debt, increasing the investment risk.
However, one low-cost way to create a recurring stream of passive income is to invest in dividend stocks. Let’s see how you can earn $2,000 in annual dividend income by investing in these three TSX stocks.
Innergex Renewable Energy stock
The global shift towards clean energy solutions is inevitable, making Innergex Renewable (TSX:INE) a top investment choice right now. In the last two years, capital-intensive companies have trailed the broader markets due to the rising cost of debt.
In fact, Innergex Renewable Energy was forced to lower its dividend payout by 50% due to elevated interest rates, driving share prices lower by almost 45% in the last 12 months.
Despite its lower dividend, Innergex pays shareholders a quarterly dividend of $0.09 per share, resulting in a forward yield of 4.5%.
Innergex Renewable emphasized that its updated capital-allocation strategy introduces a new payout ratio target range, increases financial flexibility, and allows for additional investments in greenfield projects.
Innergex now has a dividend payout target range of between 30% and 50% of free cash flow, freeing up $75 million annually to support its growth forecasts.
Enbridge stock
Among the most popular dividend stocks in Canada, Enbridge (TSX:ENB) pays an annual dividend of $3.66 per share, indicating a forward yield of 7.5%. Over the years, Enbridge has widened its base of cash-generating assets, enabling the energy giant to raise dividends for every year since 1995. Moreover, these payouts have risen by 10% annually in the last 29 years.
A large portion of Enbridge’s cash flows are backed by long-term contracts, making it almost immune to fluctuations in commodity prices. Despite its massive size, Enbridge is investing heavily in clean energy and accretive acquisitions, driving future cash flows and dividends higher.
Pizza Pizza Royalty stock
The final dividend stock on my list is Pizza Pizza Royalty (TSX:PZA), which provides a yield of 6.7%. Despite an uncertain environment, Pizza Pizza increased same-store sales by 8.2%, while royalty pool sales were up by 10.6%. Solid top-line growth allowed the company to expand adjusted earnings by 10.9% as its restaurant network increased by 32 net locations.
In the fourth quarter (Q4) of 2023, Pizza Pizza paid dividends amounting to $5.7 million, or $0.23 per share, up from $5.1 million, or $0.2075 per share, in the year-ago quarter. It ended Q4 with a payout ratio of 96%, which might seem high. But an asset-light model allows Pizza Pizza to distribute a majority of ts earnings to shareholders.
The Foolish takeaway
COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
Innergex Renewable | $8.30 | 1,305 | $0.09 | $117.5 | Quarterly |
Enbridge | $48.28 | 224 | $0.915 | $205 | Quarterly |
Pizza Pizza Royalty | $13.47 | 804 | $0.078 | $62.7 | Monthly |
You need to invest a total of $32,500 distributed equally in these three stocks to earn $2,000 in annual dividends. Investors should identify other quality dividend stocks and diversify their portfolio further, which lowers overall risk.
The post Want to Earn $2,000 in Annual Dividend Income? Invest $32,500 in These 3 Stocks appeared first on The Motley Fool Canada.
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More reading
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Fool contributor Aditya Raghunath has positions in Enbridge. The Motley Fool recommends Enbridge. The Motley Fool has a disclosure policy.
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