2 Canadian stocks to buy for passive income forever
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Perpetual passive income is the key to financial independence. With steady income from your savings, you can say “goodbye” to your job and “hello” to that Bahamas beach house.
To achieve this, you will need to invest a significant portion of cash in businesses that are resilient to disruption and resilient to the economic cycle. Here are the top two actions that can generate passive income for life.
Passive Income Stock #1
Loblaw Companies (TSX:L) continues to post robust sales growth figures, even as other sectors are experiencing a slowdown. With demand for groceries and medicines still expected, the company’s prospects remain intact, even in deteriorating economic conditions. Loblaw controls about 27% of the retail market in Canada, giving it a lasting advantage.
Loblaw posted a 2.9% year-over-year increase in second-quarter sales to $12.85 billion, in line with consensus estimates. Additionally, adjusted earnings rose 22% year-over-year to $566 million, with diluted earnings per share of $1.69, above consensus estimates of 1. $61.
In addition to positive earnings results, Loblaw has taken steps to strengthen its presence in drugstore retailing with the acquisition of Lifemark Health Group. He has also signed a strategic collaboration with DoorDash to expand its grocery delivery business.
While the stock is up around 15%, investors are also rewarded with an impressive dividend yield of 1.33%, ideal for generating passive income. The stock also trades at 20 times earnings, implying a 5% earnings yield.
Given that Loblaw was able to defy the market drop, it remains a solid choice, even if the stock market as a whole remains under pressure.
Passive Income Action #2
Cenovus Energy (TSX:CVE)(NYSE:CVE) is another “forever” passive income choice. This is because we need more fossil fuels than we currently produce. Our dependence on this energy source is likely to last longer than expected.
Cenovus stock is up 43.7% year-to-date. That’s a wide margin over the benchmark.
The outperformance stems from the fact that the company will remain profitable as long as oil prices stay above the $80 per barrel level. A lingering energy crisis fueled by Russia’s oil and natural gas cuts in Europe should provide support for oil prices above the $80 a barrel level.
Cenovus has decided to strengthen its long-term prospects through acquisitions, including the purchase of the 50% interest in the Toledo refinery. Therefore, growth is expected to continue amid growing demand for oil and gas. Management has also pledged to cut costs as part of an effort to boost margins.
While trading with a price/earnings multiple of 11, Cenovus is still cheap relative to historical levels. Additionally, the more than 22% pullback from 52-week highs means the stock is trading at a discount, especially considering the energy crisis in Europe and growing demand for Canadian energy.
I expect the Cenovus team to increase their dividends in the near future. With more cash flow and predictable demand, the company can finally reduce debt and reward shareholders appropriately. Keep an eye out for this passive income opportunity.