How to Earn a Defensive Monthly Income Stream

Establishing a defensive monthly income stream is possible, provided you pick the right investments. Here’s a surprising pick that can make you rich.

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

Image source: Getty Images

Generating a recurring and stable income stream is one of the most overlooked aspects of investing. Many investors focus on growth stocks or choose investments solely on the size of their (often unsustainable) yields. Fortunately, there is a way to have both growth and income in a single package that provides a defensive monthly income stream.

Enter Shaw Communications (TSX:SJR.B)(NYSE:SJR), which is the investment you need as part of your portfolio.

What Shaw offers, few can beat

Shaw is one of Canada’s Big Telecoms but is neither the largest nor the most well-known. Unlike some of its larger peers, Shaw is a pure-play telecom, without a media segment. Long-term investors may recall that Shaw once did have a large media segment, but that business was sold off to finance Shaw’s wireless segment.

As a result, Shaw’s wireless segment is still considerably smaller than the other Big Telecoms. That being said, Shaw does use its smaller size as a means to gain subscribers from those peers, through aggressive pricing and favourable data allowances. This was evident in the most recent quarterly update, where Shaw reported a record net new 101,000 wireless subscribers. That impressive growth, which was a  31% improvement over last year, was partially attributed to Shaw Mobile.

Shaw Mobile is Shaw’s latest mobile offering, which targets existing subscribers. The service allows existing subscribers to bundle mobile service onto their account, providing a handsome discount. Again, it’s about drawing in subscribers from the competition on aggressive terms.

This is a brilliant move by Shaw, as it finally offers a defensive moat around its still-new mobile offering. Further to this, the new service allows Shaw is expanding its coverage area for Shaw Mobile subscribers, who can connect via wireless points throughout metro areas. This is a value-add for those customers and a long-term game changer for Shaw.

So why exactly are wireless connections so important? Over the past decade, mobile devices have evolved from being used just as auxiliary communication devices. Those devices are now an integral part of our modern world. As part of that transition, our mobile devices have replaced well over 100 standalone devices that we used to surround ourselves with. Prime examples of this include alarm clocks, cameras, music players, or even landline phone connections.

Did someone say income?

One of the main reasons why investors flock to Canada’s telecoms is for the dividend that they provide. Unlike some of its larger peers, Shaw does not provide regular annual bumps to its dividend. What the company does provide is arguably just as good, if not better.

Shaw provides investors with a monthly dividend, which is a welcome rarity for income-seekers. The current yield works out to a tasty 5.32% yield, making it one of the highest payouts available for what is otherwise a defensive investment. To put some numbers behind that earnings potential, a $25,000 investment in Shaw will provide you with $110 every month.

This factor alone makes Shaw a great option for investors looking to establish a defensive monthly income stream.

Your defensive monthly income stream awaits you

No investment is without risk, and that includes Shaw. Still, what Shaw does offer is impressive. Between the growing wireless segment and defensive core subscription services, Shaw has long-term appeal for growth investors. Throw in a healthy monthly dividend and you have a stock that could be part of any well-diversified portfolio.

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 Demetris Afxentiou owns shares of Shaw Communications.

More on Dividend Stocks

financial freedom sign
Dividend Stocks

Million-Dollar TFSA: 1 Way to Achieve to 7-Figure Wealth

Achieving seven-figure TFSA wealth is doable with two large-cap, high-yield dividend stocks.

Read more »

analyze data
Dividend Stocks

How Much Will Manulife Financial Pay in Dividends This Year?

Manulife stock's dividend should be safe and the stock appears to be fairly valued.

Read more »

food restaurants
Dividend Stocks

Better Stock to Buy Now: Tim Hortons or Starbucks?

Starbucks and Restaurant Brands International are two blue-chip dividend stocks that trade at a discount to consensus price targets.

Read more »

Hand arranging wood block stacking as step stair with arrow up.
Dividend Stocks

1 Growth Stock With Legit Potential to Outperform the Market

Identifying the stocks that have outperformed the market (in the past) is relatively easy, but selecting the ones that will…

Read more »

money cash dividends
Dividend Stocks

Passive Income: The Investment Needed to Yield $1,000 Per Annum

Do you want to generate a juicy passive-income stream? Here's a trio of stocks that can generate a yield of…

Read more »

Shopping card with boxes labelled REITs, ETFs, Bonds, Stocks
Dividend Stocks

Invest $10,000 in This Dividend Stock for $1,500.50 in Passive Income

If you have $10,000 to invest, then you likely want a core asset you can set and forget. Which is…

Read more »

IMAGE OF A NOTEBOOK WITH TFSA WRITTEN ON IT
Dividend Stocks

Here’s the Average TFSA Balance in 2024

The average TFSA balance has steadily risen over the last six years and surpassed $41,510 in 2023. Will the TFSA…

Read more »

potted green plant grows up in arrow shape
Dividend Stocks

TFSA Set and Forget: 2 Dividend-Growth Superstars for the Long Run

I'd look to buy and forget CN Rail (TSX:CNR) and another Canadian dividend-growth sensation for decades at a time.

Read more »