Value stocks

2 Value Stocks That Are Passive Income Stars

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These quality value stocks are passive income stars! Don’t miss the opportunity to reverse in this market correction.

TD Bank shares are getting cheap for passive income

In a normal market, this would be a rare sight for Toronto-Dominion Bank (TSX:TD)(NYSE:TD) to achieve a 4% dividend yield. In this market correction, the quality bank has fallen 24% from its peak and is now yielding 4.3%, making it more attractive for passive income.

The banking stock is affected by a looming recession over the next year. We don’t know how far it could fall. However, investors with a five-year investment horizon could pocket compound returns of around 13-15% per year. Assuming the low end, a $10,000 investment would turn into around $18,424. More importantly, your return on cost could reach almost 6.5% for incredible passive income.

The largest North American bank offers significant exposure to the US economy and a core business in Canada. Its focus on retail banking makes it a lower risk investment than many other banks.

And if you have a long-term investment horizon of 10 years or more, it makes sense to accumulate TD shares as your core holding. A systematic strategy might be to buy some now and buy more every few months or so to build up a full position.

TD Dividend Yield Chart

TD Dividend Yield Data by YCharts

The next passive income star could be a wonderful addition to your TFSA for tax-free income!

5% yielding Canadian REIT on sale

Canadian Net REIT (TSXV:NET.UN) has a portfolio of high quality commercial real estate assets. It holds interests in approximately 99 properties in Eastern Canada and maintains a high occupancy rate of approximately 99%.

Real estate stock has weathered the ups and downs of the business cycle while increasing its book value per share. Currently, it is trading close to book value, making the passive income stock for sale.

Table of NET.UN price to book value

NET.UN Price to Book Value data by YCharts

More importantly, the stock’s monthly cash distribution has increased every year since it began paying one in 2012. This year marks its decade-long track record of increasing its payout to unitholders. . Its 10-year dividend growth rate is 10.5%, which has doubled unitholder income in about 6.86 years, as predicted by the rule of 72 for a lump sum investment made 10 years ago. .

Its growing cash distributions are supported by even faster growth in funds from operations (FFO), setting Canadian Net REIT’s recent FFO payout ratio sustainably at approximately 56%.

The REIT’s business model is defensive. It has long-term leases without management and triple net which increase the stability and predictability of its FFO. Another growth factor is its ability to acquire new properties or participate in new developments. A confidence booster for investors is the strong insider ownership of around 14% of the trust.

At $6.75 per unit, the stock is trading at a present value similar to 2020 pandemic levels. It is now yielding 5%, making it a strong generator of passive income. If you don’t need the income, now is the best time to activate the DRIP for dividend reinvestment, which will result in a higher effective return, especially if prices remain very cheap!