Collect Passive Income With These 2 Dividend Kings

Investing in dividend kings Pembina Pipeline Corp. (TSX:PPL)(NYSE:PBA) and Inter Pipeline Ltd. (TSX:IPL) is the easiest and stress-free way to create passive, steady income.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The easiest route passive-income seekers take to generate extra income to augment regular income is through dividend stocks. The same type of stocks is appealing to would-be retirees wanting to get a head start.

Pembina Pipeline (TSX:PPL)(NYSE:PBA) is perhaps the premium choice by many because it pays monthly dividends. The next best choice is another company belonging in the oil and gas midstream industry. Inter Pipeline (TSX:IPL) also has the attributes of a dividend king.

A top pick through the years

Pembina Pipeline is among the solid investments on the TSX. The midstream energy stock has established a good name in the industry. If there are a utility grade and smooth operators, the 60-year-old company is at the forefront. Retirees and other investors rely on the monthly dividend income to cover day-to-day expenses.

These investors can easily budget the dividend earned vis-a-vis living expenses. The $8.3 billion company is paying nearly 5% dividend yield. For the last five years, the average dividend yield is 4.7%. Long-time and loyal investors can confirm the generous earnings derived over the years.

But would-be investors are advised to evaluate Pembina on the basis of performance and not just because the stock is a high-yield dividend stock. Midstream operators benefit from sound economics, particularly the continued global demand for oil.

Midstream companies are also less exposed to commodity price risk compared with energy companies operating on the exploration side. That is evident in growing profitability in the last three years.

A greater majority of Pembina’s profits is derived from fee-based revenue and is therefore predictable and more stable as opposed to non-fee revenue. In 2018, net income rose to $1.278 billion, which represents a 44.7% increase from the previous year.

You’re investing in a pure-play energy infrastructure company that has substantial size and scale. The company can reward investors with market-beating and outsized total returns. For the last decade, the annual compound growth rate is 19%.

A worthy alternative

Another familiar name in the energy industry and well-known for paying exceptional dividends is Inter Pipeline. Although the size is just one-third of Pembina, the company is a good source of dividend income. The current dividend yield is above 8%, which is massive by any standards.

Inter Pipeline has raised the dividend for 10 straight years which is a sign the $8.36 billion company is taking good care of investors. Just like Pembina, dividends are paid out monthly. Again, retirees or other individual investors are at ease when it comes to budgeting.

This time around, you’re investing in a low-risk business model, which is Inter Pipeline’s main competitive advantage. Most of the contracts are long-term and commodity-shielded with inflation factored in. Further, 80% of the clients are credit-worthy and investment grade.

Inter Pipeline is presently developing the first-ever integrated propane dehydrogenation and polypropylene complex in Canada. This will be the fifth business segment that will boost revenue for years to come.

Should you invest $1,000 in Pembina Pipeline right now?

Before you buy stock in Pembina Pipeline, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Pembina Pipeline wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $18,750.10!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 35 percentage points since 2013*.

See the Top Stocks * Returns as of 1/22/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Christopher Liew has no position in any of the stocks mentioned. Pembina is a recommendation of Dividend Investor Canada.

If You Thought Apple and Microsoft Were Big, You Need to Read This.

The steel industry produced the world's first $1 billion company in 1901, and it wasn't until 117 years later that technology giant Apple became the first-ever company to reach a $1 trillion valuation.

But what if I told you artificial intelligence (AI) is about to accelerate the pace of value creation? AI has the potential to produce several trillion-dollar companies in the future, and The Motley Fool is watching one very closely right now.

Don't fumble this potential wealth-building opportunity by navigating it alone. The Motley Fool has a proven track record of picking revolutionary growth stocks early, from Netflix to Amazon, so become a premium member today.

See the 'AI Supercycle' Stock

More on Dividend Stocks

Dividend Stocks

Best Stock to Buy Right Now: Fortis vs Emera

Fortis (TSX:FTS) and Emera (TSX:EMA) are both well-run utilities. Which is the better stock?

Read more »

Piggy bank with word TFSA for tax-free savings accounts.
Dividend Stocks

4 Canadian ETFs to Buy and Hold Now in Your TFSA

If you're looking for a TFSA that will stand the test of time, these four ETFs are a prime way…

Read more »

Confused person shrugging
Dividend Stocks

TFSA $7K: Where to Invest Right Now?

This TFSA strategy can boost returns while reducing risk.

Read more »

Paper Canadian currency of various denominations
Dividend Stocks

Where to Invest Your TFSA Contribution for Steady Dividends

These stocks pay attractive dividends that should continue to grow.

Read more »

Canadian Dollars bills
Dividend Stocks

TFSA Contribution: Use it to Double Your Investment

There's nothing holding you back from turning some cash into loads of cash, and a TFSA and investments are the…

Read more »

dividends can compound over time
Dividend Stocks

This 7.24% Dividend Stock Pays Cash Every Month

Are you looking for cash right away? Monthly passive income can be yours from a strong dividend stock like this…

Read more »

investment research
Dividend Stocks

TFSA: 3 Canadian Dividend Stocks to Buy and Hold for Decades

These stocks have good track records of dividend growth.

Read more »

senior man smiles next to a light-filled window
Dividend Stocks

These 3 Dividend Stocks Could Fund Your Retirement for Life

Here are three reliable Canadian dividend stocks retirees can buy now and hold for the long term to fund their…

Read more »