3 Top Dividend Stocks for Passive Income in 2022

If you’re looking for high dividend income, you could consider energy stocks like Suncor Energy Inc (TSX:SU)(NYSE:SU).

| More on:
money cash dividends

Image source: Getty Images

Are you looking for great dividend stocks that pay you passive income?

If so, I have some good news and some bad news.

The bad news is that the number of dividend stocks that have high yields is rapidly dwindling. Value stocks — including many dividend stocks — have rallied in 2022, which has sent yields lower. At the start of the year, the TSX Composite Index had a 2.5% yield. Today, it is only 2.48%. That might not sound like that big of a decline, but remember that not all stocks pay dividends. This year’s collapse in tech stocks has given dividend stocks heavier index weighting, which has supported the index yield, even with individual yields falling.

Still, the TSX is a relatively fertile soil for finding dividend stocks in. The average yield on Canadian stocks is much higher than that of U.S. stocks, and some TSX stocks still have genuinely solid payouts. In this article, I will explore three Canadian dividend stocks that can still produce ample passive income in 2022.

TD Bank

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is a Canadian bank stock that yields 3.55%. It has a long track record of dividend increases and a relatively low (44%) payout ratio.

TD had a pretty solid showing in its most recent quarter. In it, the bank delivered $3.7 billion in earnings, up 14% from the prior year. Canadian retail revenue grew 6%, while U.S revenue increased 4%.

Also in the fourth quarter, TD announced that it was buying out First Horizon, a bank chain in the southeastern United States. The acquisition will make TD the sixth-biggest retail bank in the U.S. and give it a portfolio of U.S. commercial loans — something it had been lacking before. In its press release announcing the acquisition, TD said that FHN would be “immediately accretive,” producing an earnings increase after the deal closes. If TD’s management is right, then its investors could have more dividend hikes coming in the future.

Suncor Energy

Suncor Energy (TSX:SU)(NYSE:SU) is a Canadian energy company that sells crude oil and gasoline. It is perhaps best known for Petro-Canada, a chain of gas stations it owns.

Suncor Energy recently doubled its dividend. The dividend increase only took it back to the 2019 level, as the dividend was slashed in half in 2020. However, there is considerable potential for more dividend hikes going forward. Suncor Energy already pulled off a massive quarter in Q4, with $3.14 billion in adjusted funds from operations (AFFO) and $1.55 billion in net income. The AFFO was up 157% year over year, and the $1.55 billion in net income was up from a substantial net loss the year before. SU also achieved $3.7 billion in net debt reduction in the fourth quarter.

Fortis

Fortis (TSX:FTS)(NYSE:FTS) is a Canadian utility stock that yields 3.38%. It has raised its dividend every single year for the last 47 years. The secret to that long track record of dividend increases is revenue stability.

As a utility, Fortis provides an essential service. People can’t easily “cancel” the utilities to their home, and they would not voluntarily cut them out. In recessions, they may use less heat and light than normal, but they wouldn’t stop using them entirely. As a result, Fortis’s revenue tends to be very stable over time. Most utilities enjoy this advantage. But Fortis is a more ambitious utility than most, having acquired a vast collection of subsidiaries across Canada, the U.S., and the Caribbean. Should its growth continue, it will be able to keep hiking its dividend for the foreseeable future.

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 Andrew Button owns The Toronto-Dominion Bank. The Motley Fool recommends FORTIS INC.

More on Dividend Stocks

investment research
Dividend Stocks

Best Stock to Buy Right Now: TD Bank vs Manulife Financial?

TD and Manulife can both be interesting stock picks for today, depending on your investment style.

Read more »

A worker gives a business presentation.
Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

These stocks are out of favour but could deliver nice returns over the coming years.

Read more »

Man holds Canadian dollars in differing amounts
Dividend Stocks

This 5.5 Percent Dividend Stock Pays Cash Every Month

This defensive retail REIT could be your ticket to high monthly income.

Read more »

Confused person shrugging
Dividend Stocks

Passive Income: How Much Do You Need to Invest to Make $600 Per Month?

Do you want passive income coming in every single month? Here's how to make it and a top dividend ETF…

Read more »

Canadian Dollars bills
Dividend Stocks

3 Monthly-Paying Dividend Stocks to Boost Your Passive Income

Given their healthy cash flows and high yields, these three monthly-paying dividend stocks could boost your passive income.

Read more »

Make a choice, path to success, sign
Dividend Stocks

The TFSA Blueprint to Generate $3,695.48 in Yearly Passive Income

The blueprint to generate yearly passive income in a TFSA is to maximize the contribution limits.

Read more »

hand stacks coins
Dividend Stocks

3 Ultra-High-Yield Dividend Stocks You Can Buy and Hold for a Decade

These three high-yield dividend stocks still have some work to do, but each are in steady areas that are only…

Read more »

senior man and woman stretch their legs on yoga mats outside
Dividend Stocks

TFSA: 2 Canadian Stocks to Buy and Hold Forever

Here are 2 TFSA-worthy Canadian stocks. Which one is a good buy for your TFSA today?

Read more »