Most salaried people like the assurance of getting a fixed amount at regular intervals. They can plan their expenses accordingly. But every job carries some degree of risk. Recent data from Statistics Canada showed that a net of 65,500 jobs were lost in August. This is a sign that it is time to build passive income that can replace your salary in the event you lose your job. Rome wasn’t built in a day, and neither will be a portfolio that can give you passive income equivalent to your salary. But with regular investments and compounding in the dividend stocks below, you can build it faster.
Five dividend stocks for years of passive income
Two Canadian stocks to buy for dividend growth
Power Corporation of Canada (TSX:POW) is a financial holding company with an annual dividend yield of 4.1%. It earns income from dividends paid by its operating companies, Great-West Lifeco and IGM Financial. The company has diversified exposure to the North American, European, and Asian financial markets, from insurance to wealth management to private equity and real estate. The asset management fees and premiums help it pay and even grow dividends annually at an average rate of 7%.
POW has absorbed the pandemic shock and tariff war and grown its dividends for the last 11 years and can continue to do so, thereby growing your passive income faster than inflation.
Canadian Natural Resources (TSX:CNQ) has an annual dividend yield of 5.4% and an attractive dividend growth rate of 10%. The company has been growing dividends by double digits for 24 years in a row thanks to its low maintenance and high oil and gas reserves. Despite oil price fluctuations, Canadian Natural Resources manages to grow dividends as it buys back shares, which reduces share count, and repays debt, which reduces finance expenses.
The Canadian government’s push to export liquefied natural gas to other countries could benefit Canadian Natural Resources, as it would open new markets for its output. Thusly, the stock could continue growing dividends by double digits in the long term.
Two Canadian stocks for dividend growth and compounding
The 14% dip in Canadian Tire (TSX:CTC.A) stock after its second-quarter earnings has created an opportunity to buy the dip and lock in a 4% yield. This may look equivalent to your term deposit, but the retailer increases the dividend per share annually. When the business is booming, the dividend growth can go up to 38%, and in lean periods, 1.4% growth keeps the ball rolling.
After the first full quarter of tariff impact, sales are picking up. Canadian Tire’s True North strategy to boost sales has increased expenses for the short term, but it could bring cost savings and increased sales in the long term and drive its dividends.
Telus (TSX:T) stock offers a 7.5% dividend yield and even grows dividends every six months. The management has set an annual dividend growth target of 3–8% for the FY26-FY28 period. While high leverage and price wars have affected its profit margins, the telco is restructuring to reduce its debt and increase its average revenue per user. The outcome of restructuring will take some time but will help the company grow its dividends in the long term.
Both stocks offer a dividend reinvestment plan (DRIP) that gives more income-generating shares in the place of cash dividends. Staying invested in the DRIP for the long term can help you accumulate a sizeable number of shares and compound your passive income.
A high-yield stock for monthly passive income
SmartCentres REIT (TSX:SRU.UN) has a dividend yield of 6.9%, which it pays from the rental income it collects from tenants like Walmart. The REIT is the largest retail REIT in Canada and has a strong tenant base, high occupancy, and management expertise to withstand a downturn. The REIT sustained the 2007 Financial Crisis without a dividend cut or pause, which makes it a buy if you are concerned about another 2007-like recession.
The above stocks can diversify your passive income sources and grow them just like your salary without the risk of losing a payment source.