We all make financial mistakes. Some of us don’t save enough for our retirements, while others spend more than they have. But one of the most common financial mistakes most people make is that we don’t create passive-income streams for ourselves and rely quite heavily on a single income source. It’s not necessarily a bad thing, but in this volatile economy, it can be devastating if you lost that single source of income.
There are several ways of creating an alternative income stream. Some of those ways require you to have a hefty amount of capital (like real estate), while others might be a bit risky (growth stock). Some investments also require you to take an active part in “managing” the investment.
That’s why dividend stocks blow other ways of making easy money out of the water. If you can find reliable dividend stocks, you can create a set-and-forget income stream.
Three stocks might help you with that.
An income fund
Canoe Income Fund (TSX:EIT.UN) has been a dividend investor favourite for a very long time. It currently offers a mouthwatering yield at a conservative payout ratio. The 11.4% yield can help you start a $190-a-month dividend income with $20,000 invested. It might not pay all the bills, but it can certainly take some pressure off your primary income.
The fund hasn’t much to offer when it comes to capital growth, but it did recover quite swiftly after the pandemic, and it’s almost at its former valuation. It’s composed of a decent selection of U.S. and Canadian stocks. As one of the largest closed-end funds in the country, the fund also has a decent pedigree and an efficient management team.
A commercial real estate firm
Commercial real estate, especially retail fronts and hospitality-related properties, has taken a serious hit during the pandemic. But commercial real estate giants like Brookfield Property Partners (TSX:BPY.UN)(NASDAQ:BPY) have recovered reasonably well. The company has a diverse portfolio of properties that include some tormented segments (hospitality, office, retail), but the valuation of the company didn’t stay down because of it.
The share price is still down 16% from its pre-pandemic high, which allows investors to buy this real estate giant at a discount (and fairly valued rate). You can also lock in a juicy 5.8% yield that can get you about $95.5 a month if you invest $20,000 in the company.
This $19.48 billion (market cap) giant has about 35% of the AUM outside North America, giving it a decent international presence.
A healthcare business
Even if the pandemic hasn’t softened you up to medical stocks, Extendicare’s (TSX:EXE) 7.5% yield might. With a $20,000 investment, this yield would result in a monthly income of $125. The company has been providing long-term care and medical assistance to Canadian seniors for over five decades. It has a decent reputation, and it’s a community-integrated company.
The company has both a B2C and a B2B front. It serves seniors directly via its three major brands: Extendicare, Paramed, and Espirit. It also has two consulting and contracts services businesses (B2B). With a decent service spread, the company is likely to keep its investors funded with its generous dividends.
With $60,000 invested in these three companies (which is less than the amount you can have in a fully stocked TFSA), you can have an easy passive income of over $400 a month. That’s quite an amount, and if it’s coming out of your TFSA, it’s also tax-free. Any capital growth you can accumulate along the way is just a cherry on top.
Speaking of dividend stocks that can help you create an easy income source...
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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.