Have you been saving money for a rainy day or emergency fund? It’s a good habit if you are, because there’s instant liquidity. These days, however, rising inflation can erode the value of cash or reduce your purchasing power. Many Canadians don’t just save but use their accumulated savings to invest and make more money.
Dividend investing is the simplest way to earn passive income and cope with higher fuel prices and goods. Your capital can remain intact while producing recurring income streams. Earning $10, $20, or $30 in daily passive income is possible, depending on the dividend yield of your chosen investment.
$10 daily Assuming the target is $10 per day, if you purchase $55,000 worth of shares of Freehold Royalties (TSX:FRU) and the goal would be met. The royalty stock pays a 6.56% dividend. If you can only afford to invest $27,000, Labrador Iron Ore Royalty (TSX:LIF), or LIORC, could deliver the equivalent amount. Its yield is 13.32%.
Both companies derive revenues from royalties. Freehold, which is in the energy sector, trades at $14.64 per share, while a share of LIORC, a materials stock, costs $41.30. Performance-wise, the former outperforms, up 27.52% year to date, while the latter is up 11.35% so far in 2022.
Top 100 As of April 1, 2022, Freehold Royalties is the 100th top-performing TSX stock. Its trailing one-year price return is 113.62%. Last year was an active one for the $2.2 billion oil and gas royalty company. According to its president and CEO, David M. Spyker, Freehold established royalty positions in some of North America’s best oil and gas basins.
Freehold entered 2022 with strengthened asset base and balance sheet. It also assures long-term sustainability of the business. Because of strong activity levels and several acquisitions last year, the company achieved record average production levels. In 2021, royalty and other income rose 129% to $206.19 million versus 2020.
Net income for the full year was $72 million compared to the net loss of $13.93 million in the previous year. The year-over-year growth in cash flows from operations and funds from operations were 146% and 160%, respectively. More importantly, management increased its monthly dividend every quarter by 33% — the highest percentage increase since late 2015.
Maximum yield to the extent possible LIORC is high-yield dividend stock, but it’s unique. While the current dividend is a mouth-watering 13.32%, the yield varies (higher or lower) depending on its royalty source. The $2.64 billion company, through its wholly owned subsidiary Hollinger-Hanna, has a 15.1% equity interest in Iron Ore Company of Canada (IOC).
IOC is Canada’s leading producer of iron ore and iron ore pellets that are sold globally. Since the gross overriding royalty (7%) and sales commission (10%) of Hollinger-Hanna are percentage-based, revenue and dividend payouts are constantly fluctuating.
Because of the favourable pricing environment in 2021, LIORC reported 33.82% and 84.2% year-over-year increases in operating revenues and net income, respectively. Cash flow from operating activities soared 133.57% versus 2020. Consider the unique setup of LIORC before you invest, but, generally, the royalty company pays cash dividends from net income to the maximum extent possible.
Many options Dividend investing produces passive income you would need to cope with rising inflation. Freehold and LIORC are just two of the many options for income investors.
The post Passive Income: How to Earn $10 in Dividends Every Day appeared first on The Motley Fool Canada.
Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool recommends FREEHOLD ROYALTIES LTD.