Passive Income Powerplay: 2 Prized Stocks That Could Soar!

SmartCentres REIT (TSX:SRU.UN) and TC Energy (TSX:TRP)(NYSE:TRP) are in rally mode, but is either passive income play ready to buy?

Joey Frenette ❯

Joey Frenette is a journalist, University of British Columbia graduate, ex-engineer, Warren Buffett fanatic, and Fool who's completed CFA Level 1. He’s been investing since 2014 and is always on the hunt for value, regardless of the market "weather." Before writing at The Motley Fool, Joey worked as an analyst/developer at several Canadian small- and mid-cap software firms, including Syscon and Avigilon. Beyond Motley Fool, Joey’s work can be found at TipRanks and InvestorPlace. Follow or send him a message on X (or Twitter) @realJoeFrenette

Published April 6, 2022 4:27 pm EDT

Passive income stocks are a great place to be if you’re worried about your cash hoard shedding purchasing power by the day at the hands of high inflation.

Yes, central banks are starting to be a bit more hawkish with the aim of taming the current rate of inflation. But there’s a real risk that inflation could be sticking around for a whole lot longer. If the Ukraine-Russia crisis worsens, the Fed may need to be slightly more dovish, allowing inflation to linger a bit longer to engineer some sort of “soft landing” to prevent a return to the levels of unemployment witnessed during the depths of the coronavirus recession.

In any case, I think SmartCentres REIT (TSX:SRU.UN) and TC Energy (TSX:TRP)(NYSE:TRP) are among the most intriguing passive income powerplays on the TSX Index these days. Shares of SRU.UN and TRP yield a whopping 5.7% and 5%, respectively, at the time of writing. Let’s take a closer look at each name to see which could power your passive income stream for the next five years!

SmartCentres REIT

SmartCentres REIT is my favourite Canadian REIT right now. If possible, Canadians should stash the name in their TFSAs to get the most out of the rich distributions that’ll float investors’ way. For those unfamiliar with the company, it’s a strip mall-focused REIT founded in 1989. Shares crashed in 2020, but have since bounced back above the $32 per share level. Although the distribution has shrunk amid the rally, I still think shares are ridiculously cheap for those looking for passive income and multiple expansion over the next decade.

Smart houses financially healthy tenants. Lockdowns weren’t able to knock down Smart’s distribution. Looking ahead, Smart is diversifying into residentials, while maintaining its expertise in housing high-quality brick-and-mortar retailers. I think the retail-residential mix could be big news for the firm and improve the quality of its adjusted funds from operations.

Things are finally looking up for the REIT, making it one of my favourite income plays today.

TC Energy

For those looking to take on a bit more risk, we have energy pipeline play TC Energy. Like Smart, it’s endured tough times amid the COVID recession, with shares that are just flirting with those pre-pandemic highs. I think TC is in a spot to surpass such highs, given energy industry tailwinds brought forth by rising commodity prices and the many cash-flow-generative projects that are just as compelling as Keystone.

With the Ukraine crisis propelling shares in recent months, I think TRP stock is in a great spot to breakout. The $70 billion midstream operator is geographically diversified, with gas assets in Mexico, and is in great shape to fly higher at the hands of a continued rotation out of growth and back into dividends and value.

At writing, TC stock boasts a below-average 0.77 beta. With a 5.2 times sales multiple and 15.8 times cash flow multiple, TC isn’t that expensive given the magnitude of tailwinds at its back. My takeaway? It’s time to buy the rally, as energy strength is unlikely to go away anytime soon.