It’s a smart financial move to try and generate multiple income streams, both active and passive, for financial sustenance. This allows better distribution of your expenses and doesn’t put too much of a strain on your primary income source. Also, with more income, you have more money to save and invest.
There are plenty of ways to create passive income. The most tried and tested is, of course, investing in dividend stocks. And when you are investing in such stocks to generate a passive income instead of growing your wealth, your focus is usually the yield and sustainability. You can therefore count on a set amount every quarter (or every month).
Building a solid income source with building materials
CanWel Building Material (TSX:CWX) is a 30-year-old construction material company with an enterprise value of $843 million. It’s Canada’s only fully vertically integrated national distributor of building materials.
The company is strategically spread out across all major cities in the country and part of the U.S. Also, the company owns 136,000 acres of private timberland.
The company’s strong position in its sector doesn’t reflect very well in the company’s history of market value. In five years, the stock has hovered around $5 per share. It hasn’t gone down much, but neither has it soared higher than $7.4 per share.
Currently, the stock is trading at $5.33 per share, which is a 4.9% increase from the same time last year. It also increased its year to year quarterly revenue growth by 6.6%.
One avenue where CanWel stock truly shines is its dividends. It’s not an aristocrat, but the company hasn’t decreased its dividend payouts since 2012.
During these eight years, the company only increased its payouts once, and since then, it has continued with its quarter payouts of $0.14 per share. With this payout, the company is currently offering a monstrous yield of 10.43%. So $15,000 in CanWel will get you $130 a month.
A fast-flowing Dividend Aristocrat
Unlike CanWel, Inter Pipeline (TSX:IPL) is a Dividend Aristocrat. The company offers monthly payouts and has increased them for six consecutive years. It also offers one of the highest yields among the aristocrats, a mouthwatering number of 7.93%. If you put the other chunk of $15,000 in Inter Pipeline, you will be generating a passive monthly income of $99 through this stock.
Inter Pipeline is about 36% down from what it used to be five years ago. But the company saw a relatively stable couple of years, where market value stabilized a bit. Currently, the company is trading at $21.6 per share at writing.
One of the company’s flagship projects, the Heartland Petrochemical Complex, is expected to be completed by 2021, and it will significantly increase the Inter Pipeline’s production capabilities.
Together, CanWel and Inter Pipeline hold the potential of earning you about $229 a month on your $30,000 investment. With dividends alone, the stocks will pay off your initial investment in about 11 years.
And if there are any capital gains, that’s just the cherry on top — not to mention the dividend growth potential, which could thicken your passive increase significantly in the coming years.
So if you are planning on creating a passive income source, CanWel and Inter Pipeline deserve thorough consideration.
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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Adam Othman has no position in any of the stocks mentioned.