New Investors: The 2 Best Options to Earn Regular Passive Income

Many investors, including myself, dream of having their portfolios cover their day-to-day expenses. Fortunately, this is possible with dividend stocks. Dividend stocks are interesting because, unlike other investments that offer passive income, the barrier to entry is very low. With small amounts of capital, investors can start building a passive income portfolio today. In this article, I will discuss the two best options for new investors to start earning regular passive income today.

Buy one of the big Canadian banks

Canadian banks are known for being strong dividend stocks. At the forefront of the industry is a group of banks known as the Big Five. These companies have been in operation for over a century. This long history has allowed them to build very impressive moats. Given the highly regulated nature of Canada’s banking sector, it would be very difficult for smaller competitors to outperform this group to become the new industry leader. If I could only invest in one Canadian bank, this would be it Bank of Nova Scotia (TSX:BNS)(NYSE:BNS).

The Bank of Nova Scotia first paid its shareholders a dividend on July 1, 1833. Since then, the company has never missed a dividend payment. That’s the equivalent of 189 years of continuous dividend payments. In addition to a long history of reliable dividend payments, the Bank of Nova Scotia offers a high dividend yield. With an expected dividend yield of 5.07%, the Bank of Nova Scotia could offer investors good value for their money.

Consider investing in utilities

Investors should also consider buying shares in utility companies. This is because utilities typically receive recurring revenue. This offers utility companies a very predictable and stable revenue stream. For this reason, dividends are easy to plan. Many energy suppliers therefore not only reliably pay dividends, but also consistently increase their payouts. If you look at the list of Canada’s Dividend Aristocrats, you’ll see that the top two companies are both in the utilities sector.

Out of all the Canadian utilities, my favorite stock is fortis (TSX:FTS)(NYSE:FTS). This company provides regulated gas and electricity services to more than 3.4 million customers in Canada, the United States and the Caribbean. With $60 billion in assets under management, Fortis is a major player in the global utilities sector.

Like Bank of Nova Scotia, Fortis is a huge dividend stock. It’s managed to grow its dividend payout in each of the last 48 years. That means Fortis was able to increase its dividend despite operating through the Great Recession and the COVID-19 pandemic. Both of those events were major reasons why many solid dividend stocks had to halt dividend increases or suspend payouts altogether. With an expected dividend yield of 3.55%, Fortis should be a very attractive stock.