One way for investors to generate recurring income on a passive basis is through dividend stock investments. Dividend payments are not certain, so you should find firms that are positioned to grow profits and cash flows steadily over the course of market cycles. In an ideal world, these dividend companies would be a part of growing addressable markets, which would support their dividend growth and eventually raise shareholders’ effective yield.
Enbridge (TSX:ENB), one of Canada’s biggest corporations, is a well-liked dividend investment that gives investors a satisfying 7.7% yield. Enbridge has increased its dividend by 10% a year for the past 28 years, demonstrating the stability of its cash flows even though it is a member of the highly cyclical energy sector.
Because long-term contracts and inflation are the main sources of Enbridge’s cash flows, the energy behemoth is mostly immune to changes in the price of commodities. It has a competitive moat and is building up its cash-generating asset base, which will increase profits and dividends in the future.
With a 4.1% dividend yield, owners of alternative asset manager Brookfield Asset Management (TSX:BAM) get an annual dividend of $1.75 per share.
BAM gives you exposure to verticals including renewable energy, infrastructure, real estate, finance, and private equity, with US$850 billion in assets under management. Real assets with consistent profit generation are what BAM invests in; these assets are still vital to the world economy.
In the first nine months of 2023, the business has raised US$61 billion in capital, with US$26 billion coming in the third quarter (Q3). Furthermore, BAM finalised its sixth strategy for private equity at a record-breaking US$12 billion.
For the third quarter, Brookfield Asset Management recorded distributable earnings of US$568 million, and for the previous twelve months, US$2.2 billion. The company’s fee-based profits, which made up all of its distributable earnings in the previous 12 months, will continue to be a major factor in dividend increases going forward.
BAM ended the third quarter with fee-related earnings of US$565 million, up 8% from the previous year thanks to its capital deployment operations. In contrast, fee-bearing capital increased by 8% in Q3 2023 to US$440 billion.
The last dividend stock on my list is Nuvei (TSX:NVEI), a lucrative fintech business with strong growth. Nuvei’s market capitalization of $3.6 billion puts it at 85% below its all-time highs, providing a significant bargain on a high-quality TSX stock.
In Q3, Nuvei handled US$141.2 billion in total payments, a 62% increase over the same period last year. This allowed Nuvei to complete the quarter with US$868.4 million in revenue, up 39% over the same period the previous year. Furthermore, 89% of the entire volume was made up of e-commerce.
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