If you have $10,000 ready to invest and are looking to create a passive income generating supermachine, look no further than the Canadian stock market. There are so many companies that are sitting at depressed prices today.
While much of this is reasonable given the huge contraction in the economy over the past few months, their long-term prospects are still strong.
There is a weak economy, however, and dividend cuts are already a reality for many companies. Where should investors look for stable, increasing dividends that can generate solid passive income for years?
The big telecom dividend payers
Your first stop for big income should be the telecom companies. Many companies are shifting to online work, which means there will be an increasing amount of traffic in the years ahead. In addition, the IoT revolution is still underway. Our fridges, doorbells, and robot vacuums need to communicate with each other somehow. The internet is on the rise.
Canada’s biggest internet provider, BCE Inc. (TSX:BCE)(NYSE:BCE) is positioned to capitalize on the tech shifts that are currently underway. The company is implementing its 5G strategy over the next several years. This is expected to be a game changer, increasing internet connectivity substantially.
All of this demand generates a ton of free cash flow, $627 million reported in Q1 2020. The solid free cash flow powers dividend growth as well. In April, BCE announced that it would continue its string of increases with a 5% boost to the quarterly payout.
Now, investors will receive $3.17 a share each and every year. If you buy shares today, it amounts to a yield of about 5.85%.
A super pipeline utility
Some of the biggest yields in Canada today come from the energy pipelines. Enbridge Inc. (TSX:ENB)(NYSE:ENB) is the biggest pipeline company in Canada with a market cap of around $80 million.
This pipeline giant has a network of pipelines, regulated utilities, and renewable energy projects that pump out steady cash flow for dividend payments and growth.
Right now, Enbridge’s dividend is sitting at just under 8%. This is an incredible yield for a company that has provided excellent returns for decades. It has raised its dividend by double-digit percentages in the past, growing its yield very quickly.
While the current rate has slowed down a little to a projected 5% a year, that’s still excellent growth coming from a great company. At the moment, Enbridge provides investors with $3.24 a share in dividends.
The bottom line
Both BCE and Enbridge are excellent companies that continue to reward shareholders. These dividend behemoths will continue to pay income for decades. They both have a similar dividend per share payout. Investors will get approximately $3.20 a share from the two companies if you have about $5,000 in each.
That means you can buy about 122 shares in Enbridge at the price at the time of this writing at a price of about $41 and about 90 shares of BCE at a price of around $56.
This will result in a total yearly income of about $680, or a total yield of just under 7%. Remember, income will rise over time as well as these companies continue to boost their payouts.
