The Motley Fool

How to Make $1,000 in Monthly Dividends for a Lifetime

Whether you’re a millennial with a brand new Tax-Free Savings Account (TFSA), or a retiree looking to create some padding for their Registered Retirement Savings Plan (RRSP), dividend stocks offer an excellent way to contribute to your bottom line. Finding dividend stocks with a high-yield and long history of payouts, however, can be a bit tricky.

When it comes to searching for those stocks, it’s important to look at both the company’s historical performance and future outlook. The stock should have a well-established history of consistent payouts, and a promising future outlook to make sure those payouts will continue for the foreseeable future.

That’s why today I’ll be taking a look at Inter Pipeline Ltd.  (TSX:IPL) and Vermilion Energy Inc.  (TSX:VET)(NYSE:VET) for two solid options to add to your dividend fund. Both offer a great chance to set up monthly dividends for life.

Inter Pipeline

First let’s get the obvious out of the way first with this stock. Investors are definitely buying it at this point for its dividend, which is a whopper. As of writing, the dividend yield for this stocks sits at 8.5%, offering investors $1.71 per share annually, which amounts to $0.1425 per share per month.

The second things to note is that this stock has not performed well over the last few years, which continues today. The main issue lately has been related to the oil and gas glut, which should send the stock higher once the industry recovers.

But the company has underlined long-term contracts, which make up 72% of its business, which means that when it does make profits, those profits are insulated from price swings. As well, the company has a promising future outlook, mainly through its Heartland Petrochemical complex.

So what investors should focus on here is that there is an opportunity to buy this stock at a bargain price. According to analysts, the stock has the potential to gain to $28 per share in the next 12 months and isn’t likely to decline any further. Also, the stock has a cash flow payout ratio of 82.2% for this year, a huge increase from the 63% from last year and just the latest addition to its strong 14-year history of dividend growth and stability.

Vermilion Energy

The same obvious points as above pretty much apply the same here. Vermilion offers investors another huge dividend at 9.7%, or $2.76 per year, equaling $0.23 per share monthly. So again, investors are pretty much buying this stock for its dividend, especially given its recent performance in the last few years.

That performance is again tied to the oil and gas glut, with investors dropping the stock as the market continues to swing in a “last in, first out” type case. That could all change soon, however, and not just because of a market turnaround. The company is projecting a 19% surge in production growth for this year based on capital spending plans of about $530 million.

Investors are hoping that growth is realized given that in the last quarter, the company’s cash flow didn’t quite cover the dividend and capital spending of the first quarter, putting this amazing yield at risk. But the company believes the rest of the year will see lower spending, generating about $800 million in cash flow for the year. Basically, Vermilion is definitely more of a risk than Inter Pipeline, but the potential for huge growth is certainly there.

Foolish takeaway

Currently, both of these stocks offer investors an incredibly easy way to bring in a strong dividend every month. By investing $42,331 in Inter Pipeline, and $86,603.78, you can bring in $1,000 each month from dividend income. Of course, these are recommendations, and if you have the funds available, these stocks are a great choice.

Always do your own research, however. And while nothing is guaranteed, at these prices, both of these stocks look like a bargain today.

5 TSX Stocks for Building Wealth After 50

BRAND NEW! For a limited time, The Motley Fool Canada is giving away an urgent new investment report outlining our 5 favourite stocks for investors over 50.

So if you’re looking to get your finances on track and you’re in or near retirement – we’ve got you covered!

You’re invited. Simply click the link below to discover all 5 shares we’re expressly recommending for INVESTORS 50 and OVER. To scoop up your FREE copy, simply click the link below right now. But you will want to hurry – this free report is available for a brief time only.

Click Here For Your Free Report!

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned.

I consent to receiving information from The Motley Fool via email, direct mail, and occasional special offer phone calls. I understand I can unsubscribe from these updates at any time. Please read the Privacy Statement and Terms of Service for more information.