Buy 2,990 Shares of This Stock for $165.25/Month in Passive Income

A high-yield dividend stock can transform your investment into monthly passive income streams.

| More on:
profit rises over time

Source: Getty Images

Price swings or fluctuations are a universal risk in the stock market; no stock, regardless of sector, is insulated from headwinds. In Canada, dividend stocks are back in investors’ favour mainly due to the Bank of Canada’s rate-cutting cycle.

The Canadian Imperial Bank of Commerce said in August 2024 that money is plowing back into TSX dividend payers after the rate cuts in June and July. As of November 1, 2024, the central bank’s policy rate is down to 3.75% following a 25-basis points cut in September and a jumbo 0.50% reduction in October.

If you’re building a passive income portfolio or adding another income stock to your holdings, Chemtrade Logistics Income Fund (TSX:CHE.UN) is a sound choice. Besides a high yield, the stock pays monthly dividends. At $10.93 per share, the dividend offer is 6.04%. Also, current investors enjoy a 36.1% year-to-date gain on top of the generous payout.

If you buy 2,990 shares, the $32,830.20 investment will transform into $165.25 in monthly passive income. See the table below based on the given example:

CompanyRecent PriceNo. of Shares Div/ShareTotal PayoutFrequency
Chemtrade$10.982,990$0.6632$1,982.97*Monthly

                         *Total annual dividend payment; divide by 12 to get $165.25 monthly

Assuming you invest today and reinvest the monthly dividends, and do not pocket them, your capital will grow to $44,371.20 in five years due to the power of compounding. Your monthly dividends will become $223.34 after November 2029. The potential to earn higher monthly cash flow streams is ever-present if you can accumulate more shares.

Strong market position

Chemtrade is a $1.3 billion chemical manufacturer serving major industrial and consumer markets across North America and select countries. This diversified enterprise derives revenues from two core business segments. Investments in organic growth projects are ongoing to supplement growth. The 2024 growth capital budget is $60 million to $90 million.  

The Sulphur and Water Chemicals (SWC) segment manufactures and markets sulphur-based products and services, water treatment chemicals, and specialty chemicals. Chemtrade’s Electrochemicals (EC) manufactures and markets sodium chlorate and chlor-alkali products, for which its electrochemicals plant in Brazil has a long-term contract.

Financial performance

Chemtrade recorded record Adjusted EBITDA in 2022 and 2023 amid an inflationary environment and high interest rates. Management aims to achieve another record, although it might be a tall order due to maintenance turnaround, significantly lower selling prices in the EC segment, and reduced profit in SWC.

In the first half of 2024, revenue and Adjusted EBITDA declined 8% and 18.4% year-over-year to $866.3 million and $225 million, respectively. Nonetheless, if Chemtrade hits the high end of its EBITDA guidance range in 2024, it would result in its three highest ever years for Adjusted EBITDA. The company anticipates the second half to be stronger than the first six months.

Distribution track record

Long-time Chemtrade investors can attest to the stock’s reliability as a passive income provider. While the yield varies depending on market conditions, the monthly payouts have been uninterrupted since August 2001. Management assures that the dividends are safe and sustainable (57.3% payout ratio) because of the defensive nature of the key products.    

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 Christopher Liew has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.xxs

More on Dividend Stocks

Hand Protecting Senior Couple
Dividend Stocks

3 Blue-Chip Stocks So Safe Canadians Can Hold Them Until They Die

Canadian National Railway (TSX:CNR) is a stock worth owning for life.

Read more »

stock research, analyze data
Dividend Stocks

14.7% Dividend Yield? Buy Up This Passive-Income Stock in Bulk!

That dividend yield is high, but it still comes with some strong reasons to consider the stock outside of a…

Read more »

Canadian Dollars bills
Dividend Stocks

1 Dividend Stock That Could Create $5,000 in Tax-Free Passive Income in 10 Years

Here's why Fortis (TSX:FTS) certainly looks like a top dividend stock with outsized total return upside worth buying right now.

Read more »

ETF stands for Exchange Traded Fund
Dividend Stocks

The Best Canadian ETFs $100 Can Buy on the TSX Today

Dividend ETFs like BMO Canadian Dividend ETF (TSX:ZDV) can add passive income to your portfolio.

Read more »

space ship model takes off
Dividend Stocks

Is WSP Global Stock a Buy for its 0.6% Dividend Yield?

Here's why investors should look beyond WSP Global stock's tiny dividend yield.

Read more »

hand stacking money coins
Dividend Stocks

6 Percent Dividend Yield? I’m Buying This TSX Passive-Income Stock in Bulk!

Are you looking for a TSX passive-income titan? Here's one stock that pays handsomely that you will regret not buying…

Read more »

Dividend Stocks

Top Canadian Stocks to Buy Now and Hold for a Lifetime in a TFSA

If you want stability in your long-term TFSA, then these four are choices you can pick up again and again.

Read more »

RRSP Canadian Registered Retirement Savings Plan concept
Dividend Stocks

Here’s the Average RRSP Balance at Age 54 for Canadians

ETFs like the BMO Canadian Dividend ETF (TSX:ZDV) tend to be good RRSP holdings.

Read more »