Living comfortably with the help of passive income from dividends can be a dream come true. Here are a few top dividend stocks you can explore this month for passive income. They offer considerably more income than the Canadian stock market’s yield of about 3.1%.
Pembina Pipeline stock
Pembina Pipeline (TSX:PPL) is a large-cap energy infrastructure company. Its market cap sits at close to $25 billion. The dividend stock has paid out dividends since 1998. Notably, Pembina used to pay out monthly dividends, but this year, it switched to a quarterly dividend. Currently, its annualized payout is $2.61 per share, which equates to a dividend yield of almost 5.8% at $45.22 per share at writing. This is roughly 87% more in income than what the Canadian stock market offers today.
Analysts believe the stock is undervalued by approximately 13%. Pembina’s dividend appears to be safe. Its trailing 12-month (TTM) payout ratio was 58% of net income available to shareholders and 71% of free cash flow. The company’s S&P credit rating of BBB is also investment grade.
Bank of Nova Scotia stock
When it comes to passive income, it would be silly to leave out the big Canadian banks that are some of the most profitable businesses in our country. Among the big bank stocks, Bank of Nova Scotia (TSX:BNS) stock leads in offering the highest dividend yield of just over 6%.
The international bank remains solidly profitable in an ever-uncertain macro environment. In the TTM, the Canadian bank brought in approximately $8.7 billion in profits for its shareholders. This resulted in a recent payout ratio of close to 60%. The bank’s five-year return on equity is about 13.5%, which suggests it may be a reliable investment for the long haul.
At $68.36 per share at writing, BNS stock trades at about 8.4 times earnings. This is a meaningful discount of about 25% from its long-term normal valuation. Therefore, if the international bank is able to spur growth in the future, shareholders can experience nice capital gains on top of the juicy passive income.
TELUS stock
TELUS (TSX:T) is another blue-chip stock you can depend on for passive income. For about 19 consecutive years, TELUS stock has increased its dividend. This is the longest dividend-growth streak among the three stocks discussed. For reference, the dividend stock’s five-year dividend-growth rate is 6.6%. Through 2025, management targets to increase the dividend by 7-10% per year.
TELUS is a big Canadian telecom that offers a good mix of income and growth. It provides a nice dividend yield of just over 4.9%. Its TTM payout ratio is about 74% of net income. Analysts believe the company has the best earnings growth prospects among its big Canadian telecom peers. Correspondingly, the stock also trades at the highest multiple.
At $28.43 per share at writing, analysts believe the stock trades at a reasonable price and has the potential to climb about 10% over the next 12 months. Coupled with the dividend, that’s a near-term return potential of close to 15%, which is not bad at all!
Investor takeaway
Investors should save a good portion of their investment portfolios for dividend stocks that they can rely on for growing passive income. Save and invest regularly in this kind of dividend stocks. Then sit back and watch your passive income grow steadily but surely.
