The Canadian government’s COVID-19 Response Plan included giving $2,000 per month to eligible Canadian citizens who lost their jobs due to the government-mandated lockdown amid the pandemic.
Known as the Canada Emergency Response Benefit (CERB), the program would pay $500 per week to applicants for up to 16 weeks. There is no visible end to the pandemic, but economies across the country are reopening and adding hundreds of thousands of jobs. Still, it will take time for the millions rendered jobless to earn an income.
The government provided them with additional relief by extending the CERB for another eight weeks. While the additional support is something to appreciate, the government cannot keep extending the benefit. It would be wise to create your own CERB that will last a lifetime rather than relying on burdening the government.
Creating $2,000 per month in passive income is possible. All it takes is time, discipline, and the right investments.
Creating a CERB for yourself
Creating a passive-income stream to earn an additional $2,000 per month carries the prerequisite of having $400,000 of investable capital. It is a substantial amount, but you can accumulate it. For now, let’s discuss how you can use $400,000 to possibly earn more than the $2,000 CERB money per month.
If you have a reserve like this, you can consider investing in dividend-paying companies. One such company to consider would be Enbridge (TSX:ENB)(NYSE:ENB). At its current price, Enbridge pays its shareholders at a juicy 7.76% dividend yield. Investing $400,000 in the stock can help you earn $31,000 per year in dividends.
That is more than $2,500 per month. Enbridge also consistently grows its payouts each year, and that can help you grow your overall income to keep pace with inflation. The midstream energy company enjoys relative safety from volatility in crude oil prices, and that is what allows the company to continue financing its high dividend payouts.
Another stock you can consider investing in with a reserve like this to create your own CERB is the Bank of Nova Scotia (TSX:BNS)(NYSE:BNS). One of the oldest financial institutions in the country, Scotiabank has a streak of paying its shareholders their dividends for more than 187 years. At its current price and dividend yield, investing in shares of the bank can help you earn $25,680 per year, which translates to $2,140 per month.
Scotiabank is a stock well known for its potential as a long-term investment. It is the third-largest bank in Canada and has persevered through multiple recessions in the few centuries it has been around. The COVID-19 pandemic might be horrific, but it has the kind of liquidity to weather the storm and continue paying its shareholders.
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Discipline is necessary
You should note that it is unnecessary to invest in high-risk and offbeat stocks to earn a substantial income. There is no point in parking your money in any asset that can just as quickly sink your capital as it can double it. The idea is to look for businesses that have risen through several economic downturns and can offer you stability.
Creating a $400,000 reserve so you can invest for a decent dividend income to create your CERB should also come through investing in safe and reliable dividend stocks. Invest in a portfolio of reliable dividend stocks and reinvest the dividends to unlock the power of compounding. It may take more than 15 years to build a decent sum to invest, but patience and discipline are paramount.
CERB money is available right now, but creating your own CERB can take several years. However, the patience and perseverance to generate the capital to invest in a dividend-income portfolio can be well worth the effort. It can help you generate passive income for the best years of your life without worrying about expiry dates or eligibility criteria to keep receiving your income.
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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. The Motley Fool owns shares of and recommends Enbridge. The Motley Fool recommends BANK OF NOVA SCOTIA.