Buy 119 shares of this dividend stock for $1,083 in passive income

Written by Amy Legate-Wolfe of The Motley Fool Canada

Canadian investors may start to have difficulty finding deals. This was quite easy if you were a long-term investor who had been looking for a great deal recently. As long as you were patient, you knew that strong dividend stocks would recover when interest rates fell. But now interest rates are falling. And the deals are not that easy to find.

But such trades do exist, including in the highest dividend stocks like Northwest Company (TSX:NWC). NWC shares have risen higher and higher over the past year, but still offer a deal thanks to its dividend and valuations. So let’s take a look at why investors may still want to consider these dividend stocks, especially for the highest passive income options.

Fixed earnings

The Canadian grocery and retail operator has shown consistent performance in its latest earnings reports, pointing to both growth and dividend potential. The company’s latest earnings report for the fourth quarter of 2023 showed a 6.7% increase in consolidated net earnings to $134.3 million compared to the previous year. Diluted earnings per share increased to $2.67 from $2.51 on higher earnings despite increased interest and income tax expenses.

Moreover, NWC stock has shown resilience, rising after each earnings report over the past year. Despite a slight decline of 4.5% year-to-date, the stock’s performance reflects strong fundamentals. Analysts currently have a price target of $38 to $45, suggesting a possible upside of around 7% from the current price of around $42.

Valuable

Another bonus for NWC stock? His financial condition. The company’s financial condition is highlighted by a high return on equity (19.8%) and a high debt to equity ratio (57.5). These ratios indicate efficient use of equity capital and manageable debt levels that are beneficial to both economic growth and dividend stability.

Moreover, North West’s dividend yield as of today is around 3.8% and its payout ratio is 56.8%, reflecting a sustainable dividend policy backed by solid earnings. Looking ahead, North West’s strategic objective includes expanding its presence in remote communities and increasing supply chain efficiencies, which should support continued revenue growth.

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Finally, the company’s price-to-earnings (P/E) ratio is around 15.2, indicating a reasonable valuation compared to the broader market and retail peers. So, with all this in mind, what can investors gain from investing in NWC stock?

Conclusion

Last year, NWC shares are up 18% as of this writing. Let’s assume this will be the same next year. Let’s add that the stock also offers a dividend of 3.8%, amounting to $1.56 per share per year. To sum it up, let’s see how much passive income you can get next year with the same amounts.

You earned a return of $897.40 and a dividend of $185.64. This adds up to a total of $1,083.28 in passive income!

The post Buy 119 Shares of This Dividend for $1,083 in Passive Income appeared first on The Motley Fool Canada.

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Dumb Author Amy Legate-Wolfe has no position in any of the companies mentioned. The Motley Fool recommends North West. The Motley Fool has a disclosure policy.

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