Dividend investing is a popular strategy as it allows you to create a steady and recurring stream of passive income at a low cost. As these payouts are not guaranteed, it’s crucial to identify quality companies with stable cash flow and the ability to grow their earnings over time.
Here are two such TSX dividend stocks that could help you create $1,000 in passive income in 2024.
Brookfield Renewable Partners stock
Valued at $22 billion by market cap, Brookfield Renewable Partners (TSX:BEP.UN) offers shareholders a forward dividend yield of 5.8%. Brookfield Renewable has had a strong start to 2024, successfully deploying capital into growth while progressing its project development and advancing asset-recycling initiatives.
Brookfield Renewable emphasized that global corporate demand growth for clean energy should support its business fundamentals in the upcoming decade. Moreover, the increase in worldwide data centre investment could act as a massive tailwind for clean energy companies, including Brookfield. For instance, data centres could account for almost a fifth of the electricity consumption in the U.S. by the end of 2030.
Brookfield Renewable stated, “The global installed capacity for electricity is expected to more than double over the next 20 years while also trying to replace half of the existing capacity that will be retired as it is very carbon intensive.”
Brookfield is positioned to benefit from multiple secular tailwinds due to its large operating fleet and expansive development pipeline, which now stands at 230,00 megawatts, of which 65,000 megawatts are in advanced stages.
Additionally, Brookfield Renewable expects to generate more than US$1 billion by selling its legacy assets. The proceeds would be used to invest in higher-growth projects or lower balance sheet debt.
Despite a challenging macro environment, Brookfield generated funds from operations of US$339 million, or US$0.51 per share, an increase of 9% year over year in the second quarter (Q2) of 2024. Given its quarterly dividend payout of US$0.355 per share, Brookfield Renewable ended the June quarter with a payout ratio of 70%.
In addition to its tasty dividend yield, Brookfield Renewable stock trades at a 20% discount to consensus price target estimates.
Enbridge stock
Enbridge (TSX:ENB) is a diversified energy infrastructure giant valued at $120 billion by market cap. It owns and operates liquid pipelines, gas distribution and storage, and clean energy assets.
A widening base of cash-generating assets has allowed Enbridge to raise dividends at a compound annual growth rate of 10% each year. Today, Enbridge pays shareholders an annual dividend of $3.66 per share, translating to a forward yield of 6.6%.
Armed with a wide economic moat, around 80% of Enbridge’s EBITDA (earnings before interest, tax, depreciation, and amortization) is tied to inflation-linked long-term contracts, shielding the company from fluctuations in commodity prices.
Enbridge continues to invest heavily in capital expenditures, which should drive future cash flows and dividends higher. Moreover, the company expects to raise its dividends by 5% annually through 2026.
The Foolish takeaway
The two TSX stocks offer you an average dividend yield of 6.2%. So, you need to invest a total of $16,130 equally distributed in the two dividend stocks to earn $1,000 in annual dividend income. If the companies raise dividends by 7% annually, your payout will double in the next 10 years, enhancing your effective yield significantly.
