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Written by Jitendra Parashar at The Motley Fool Canada
No matter how high your monthly income is, having a reliable source of passive income always helps. While most Canadians want to earn monthly passive income, they have trouble figuring out how to go about it. If you don’t know it already, dividend investing in Canada could be one of the easiest and arguably the most flexible way of generating passive income each month.
In this article, I’ll give an example of how you can earn $1,000 in monthly passive income by investing in a single TSX dividend stock.
Earn $1,000 in monthly passive income with this TSX stock
When considering investing in dividend stocks on the Toronto Stock Exchange, particularly for the purpose of generating passive income each month, it’s important to select a stock with healthy financial growth trends. It’s equally important to consider its future growth potential, as most market participants prefer to invest in stocks with a strong fundamental growth outlook, which helps such stocks inch up.
Simply put, it may be wise to stay away from a dividend stock with weak future growth prospects, even if its historical financial growth trends look amazing. In addition, you may always want to stick to Foolish investing philosophy by taking the long-term approach. This way, you can ignore short-term market noise to only focus on the long term, making dividend investing much simpler and a lot more rewarding. Keeping all these basic principles in mind, Peyto Exploration & Development (TSX:PEY) could be a good monthly dividend stock to consider right now.
This Calgary-based natural gas-focused energy company currently has a market cap of $2.4 billion, as its stock continues to outperform the broader market by a huge margin. On a year-to-date basis, this TSX dividend stock has surged by 47.7% to trade at $13.67 per share against TSX Composite’s 5.7% losses in 2022. At the current market price, it has a solid 9.5% annual dividend yield and distributes its dividend payouts every month.
What makes it a reliable Canadian dividend stock?
Peyto’s primary exploration and development activity is mainly focused on Alberta’s deep basin. Its consistent focus on high-quality, long-life natural gas reserves has helped the company improve its profitability in the last few years. Notably, in the five years between 2016 and 2021, Peyto’s adjusted earnings rose 30% from $0.69 per share to $0.90 per share, despite a minor drop in its total revenue during the same period. In 2021, it reported a solid adjusted net profit margin of 23.7%.
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