Turn $10,000 Into a $700 a Year Passive Income Stream With These 2 Stocks

Now is a great time to start buying shares of divided-growing companies like Enbridge Inc. (TSX:ENB)(NYSE:ENB) in order to buying a passive income stream. If you start with these two stocks today, you can generate about $700 a year on a $10000 investment.

| More on:
A close up image of Canadian $20 Dollar bills

Image source: Getty Images

If you have $10,000 ready to invest and are looking to create a passive income generating supermachine, look no further than the Canadian stock market. There are so many companies that are sitting at depressed prices today.

While much of this is reasonable given the huge contraction in the economy over the past few months, their long-term prospects are still strong.

There is a weak economy, however, and dividend cuts are already a reality for many companies. Where should investors look for stable, increasing dividends that can generate solid passive income for years?

The big telecom dividend payers

Your first stop for big income should be the telecom companies. Many companies are shifting to online work, which means there will be an increasing amount of traffic in the years ahead. In addition, the IoT revolution is still underway. Our fridges, doorbells, and robot vacuums need to communicate with each other somehow. The internet is on the rise.

Canada’s biggest internet provider, BCE Inc. (TSX:BCE)(NYSE:BCE) is positioned to capitalize on the tech shifts that are currently underway. The company is implementing its 5G strategy over the next several years. This is expected to be a game changer, increasing internet connectivity substantially.

All of this demand generates a ton of free cash flow, $627 million reported in Q1 2020. The solid free cash flow powers dividend growth as well. In April, BCE announced that it would continue its string of increases with a 5% boost to the quarterly payout.

Now, investors will receive $3.17 a share each and every year. If you buy shares today, it amounts to a yield of about 5.85%.

A super pipeline utility

Some of the biggest yields in Canada today come from the energy pipelines. Enbridge Inc. (TSX:ENB)(NYSE:ENB) is the biggest pipeline company in Canada with a market cap of around $80 million.

This pipeline giant has a network of pipelines, regulated utilities, and renewable energy projects that pump out steady cash flow for dividend payments and growth.

Right now, Enbridge’s dividend is sitting at just under 8%. This is an incredible yield for a company that has provided excellent returns for decades. It has raised its dividend by double-digit percentages in the past, growing its yield very quickly. 

While the current rate has slowed down a little to a projected 5% a year, that’s still excellent growth coming from a great company. At the moment, Enbridge provides investors with $3.24 a share in dividends.

The bottom line

Both BCE and Enbridge are excellent companies that continue to reward shareholders. These dividend behemoths will continue to pay income for decades. They both have a similar dividend per share payout. Investors will get approximately $3.20 a share from the two companies if you have about $5,000 in each.  

That means you can buy about 122 shares in Enbridge at the price at the time of this writing at a price of about $41 and about 90 shares of BCE at a price of around $56.

This will result in a total yearly income of about $680, or a total yield of just under 7%. Remember, income will rise over time as well as these companies continue to boost their payouts. 

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 Kris Knutson owns shares of BCE INC. and ENBRIDGE INC. The Motley Fool owns shares of and recommends Enbridge.

More on Investing

tsx today
Stock Market

TSX Today: Why Record-Breaking Rally Could Extend on Thursday, March 28

The main TSX index closed above the 22,000 level for the first time yesterday and remains on track to post…

Read more »

Nuclear power station cooling tower
Metals and Mining Stocks

If You’d Invested $1,000 in Cameco Stock 5 Years Ago, This Is How Much You’d Have Now

Cameco (TSX:CCO) stock still looks undervalued, despite a 258% rally. Can the uranium miner deliver more capital gains to shareholders?

Read more »

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Dividend Stocks

TFSA Magic: Earn Enormous Passive Income That the CRA Can’t Touch

If you're seeking out passive income, with zero taxes involved, then get on board with a TFSA and this portfolio…

Read more »

Man with no money. Businessman holding empty wallet
Dividend Stocks

2 Stocks Under $50 New Investors Can Confidently Buy

There are some great stocks under $50 that every investor needs to know about. Here’s a look at two great…

Read more »

potted green plant grows up in arrow shape
Stocks for Beginners

3 Growth Stocks I’m Buying in April

These three growth stocks are up in the last year, and that is likely to continue on as we keep…

Read more »

clock time
Tech Stocks

Long-Term Investing: 3 Top Canadian Stocks You Can Buy for Under $20 a Share

These three under-$20 stocks offer excellent buying opportunities for long-term investors.

Read more »

Arrowings ascending on a chalkboard
Energy Stocks

Beat the TSX With This Cash-Gushing Dividend Stock

Canadian Natural Resources stock is well set up to beat the TSX as it continues to generate strong cash flows…

Read more »

think thought consider
Dividend Stocks

Down 10.88%: Is ATD Stock a Good Buy After Earnings?

Alimentation Couche-Tard (TSX:ATD) stock might not be the easy buy-case it once was. Here’s a look at what happened.

Read more »