Everyone dreams of having a passive income stream. That’s income that keeps coming even as you sit on your couch. You don’t need to lift a finger.
Of course, it takes effort to achieve this. Above all, it takes capital. As the saying goes, it takes money to make money.
But if you play your cards right, passive income can be yours. All you need is the right dividend stocks.
Just know that there’s a secret ingredient that can make the process much faster.
Generate easy passive income
Enbridge is the perfect income stock. It basically runs a toll road, but instead of transporting cars, it transports fossil fuels. The company moves 20% of North America’s crude oil output. That’s a massive business.
The best part is that most of the expense is incurred during the construction of pipelines. Once they’re built, cash flow generation is high. That’s how Enbridge can afford to pay an 8% annual dividend. Whatever money you invest will generate a passive income stream worth 8% of the total sum.
Let’s say you stash away $10,000. With Enbridge stock, you’ll earn $800 in annual income. If you invest $100,000, you’ll generate $8,000 in passive income.
Dividends stocks like this are a good way to make money once you already have a large sum saved. To accelerate that process, keep reading.
This is even better
There’s a reason why Warren Buffett’s Berkshire Hathaway has never paid a dividend. Buffett prefers to keep all of the capital in-house so he can continue to invest it. If you trusted Berkshire Hathaway stock, you could have crushed the performance of most dividend stocks.
You don’t explicitly receive passive income with stocks like this, but your money grows so fast that you can sell some stock and create your own dividend stream.
If you want to take this route, look for stocks like Shopify (TSX:SHOP)(NYSE:SHOP). This stock rose 36 times in value since 2015. A $10,000 investment would now be worth $360,000. If you transferred that money to Enbridge stock, you’d be receiving nearly $30,000 in annual passive income, all from an original investment of just $10,000!
The secret to Shopify stock is that it’s asset-light. For Enbridge to expand, it needs to build another pipeline. That can cost billions. As a software business, all Shopify needs to do is have a user sign up on its website. Growth is virtually free.
This asset-light approach is what’s allowed Shopify to grow sales by 50% annually for years at a time. The secret to growth is built directly into its business model.
If you want to create a passive income stream as fast as possible, you must find stocks like this. Your annual growth will go from 8% to 30% or more. That can cut decades off your expected time frame. And when you do transition to income-producing mode, your earning should also be higher.
Dividend stocks like Enbridge are great, but high-growth businesses like Shopify are the short-cut for success.
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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.
Tom Gardner owns shares of Shopify. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares), Enbridge, Shopify, and Shopify and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short December 2020 $210 calls on Berkshire Hathaway (B shares). Fool contributor Ryan Vanzo has no position in any stocks mentioned.