The Motley Fool

Put Your Cash to Work and Make $100 Monthly in Passive Income

Image source: Getty Images

Many of us saved a large chunk in the last few months with lower avenues to spend. Canadians’ savings in recent months have boosted markedly compared to the historical average. Interestingly, many Canadians are being way too conservative and loading on excess cash that they might not need, even in case of economic fallout.

Don’t be too conservative and hoard cash!

Having sufficient cash is indeed one of the most important aspects of managing your own finances. But what if you are sitting on extra cash? Then you are giving up on easy growth opportunities.

Idle money does not generate new money but loses in value with inflation. Instead, parking this money with some low-risk, dividend-paying stocks would create a passive income stream for a lifetime.

For example, an investment of $1,000 in a stable stock like Fortis (TSX:FTS)(NYSE:FTS) will make $40 in dividends annually. Not all stock market investments are equally risky. Stocks like Fortis are considered defensives because of their slow-stock movements and stable dividends.

Fortis has wonderfully rewarded its shareholders in the past several years. It operates as a large regulated utility that facilitates stable dividends for shareholders. Fortis stock has returned 8% compounded annually in the last decade.

While stocks are volatile in the short term, this risk can be minimized with a longer investment horizon. That’s why stock markets have been a solid money multiplier for long-term investors. After all, equities have outperformed all other asset classes for decades. Also, defensive stocks exhibit lower volatility than broader markets. Thus, it makes sense for investors to park some part of their emergency cash in defensive stocks.

Top safe, dividend-paying TSX stocks

Another safe stock with stable dividends would be TC Energy (TSX:TRP)(NYSE:TRP). It yields 6.5% at the moment, which means an investment of $1,000 will make $65 in dividends annually. Such a steep dividend yield in this low-interest rate environment makes TRP stock attractive for income seeking investors.

TC Energy also has cash flow visibility like Fortis because of its low-risk operations. It is one of the biggest oil and gas pipeline companies and generates stable revenues. Investors can depend on TRP’s consistently growing dividends, given its long-term, fixed-fee contracts and cash flow stability.

Top TSX stock TRP has returned 9% compounded annually in the last 10 years with dividends.

If you are looking for a higher payout, your can increase the initial investment in these stocks. For example, an investment of $20,000 in TC Energy stock would generate $1,300 annually or $108 per month in dividends.

These defensives would generate passive income for life. If you invested $20,000 in TC Energy stock a decade ago, the amount would have grown to $23,000 today, including dividends.

Bottom line

So, if you are sitting on some extra cash, consider it putting in some top TSX dividend stocks. The cash will be deployed for higher returns while creating stable payouts for the long term.

Just Released! 5 Stocks Under $49 (FREE REPORT)

Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $49 a share.
Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune.
Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.

Claim your FREE 5-stock report now!

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 Vineet Kulkarni has no position in any of the stocks mentioned. The Motley Fool recommends FORTIS INC.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.