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

Airport and plane

Is Air Canada Stock Finally a Buy This Season?

When you are investing in a prospective recovery, it’s a good idea to watch for favourable industry trends.

Read more »

TFSA and coins
Dividend Stocks

TFSA Investors: How to Earn $2,500 Per Year on $40,000

Investors have an opportunity to secure high yields while reducing risk in their TFSA portfolios.

Read more »

Illustration of bull and bear

A Bull Market Is Coming: 3 Growth Stocks That Could Thrive

These growth stocks all trade undervalued and have tonnes of long-term potential, making them some of the best to buy…

Read more »

Volatile market, stock volatility
Metals and Mining Stocks

Weathering Volatility: Strategies for Success With TSX Stocks

The key to handling volatility is changing your asset mix. For example, if you suspect a market downturn, you can…

Read more »

Path to retirement
Dividend Stocks

Retirement Wealth: 2 Top Dividend Stocks for TFSA Investors

Parking a sizable portion of your savings in reliable dividend stocks is a time-tested wealth-building strategy appropriate for a wide…

Read more »

sale discount best price
Tech Stocks

2 Growth Stocks to Buy Every Time They Go on Sale (Like Now)

The right growth stocks are worth buying in almost any market, but they are especially attractive when they come with…

Read more »

Financial technology concept.
Bank Stocks

Canadian Bank Stocks Are Crashing: Should You Buy the Dip?

As bank stocks like Royal Bank of Canada (TSX:RY) are crashing this year, should you go shopping for value plays?

Read more »

Senior Couple Walking With Pet Bulldog In Countryside
Dividend Stocks

CPP Disability Benefits: Are You Eligible?

Fortis Inc (TSX:FTS) stock could provide you with passive income if you can't get CPP disability benefits.

Read more »