It is difficult to keep up with daily expenses in this inflationary environment. Your current income is not enough. At times like these, you likely wish you had another source of income — something that doesn’t demand a lot of time but gives regular pay that takes care of at least one bill. There are several ways to earn passive income.
How to earn passive income
You can write an e-book, advertise on your car, rent out a portion of your garage, or sell products through affiliate marketing. But all of these require time and come with their challenges. However, stocks are a great way to earn passive income. Most investors put their money to work and enjoy a regular monthly income without working for it.
Investments are similar to trees. You plant a seed, water it frequently, and let the tree grow. Over time, it will give you fruits and protect you from storms. Start investing today and invest regularly. It can be weekly, fortnightly, or monthly. The amount can be as small as $50, and you can increase or decrease it depending on your disposable income.
Even if you invest $50 a week, your investment amount is $26,000 after 10 years. With this level of investment, an average dividend yield of 6% can earn you $130 per month. If you increase your weekly investment amount annually by 10%., your investment amount will be $41,400 after 10 years, and your dividend income will be $207 per month. There are certain high-yielding stocks that give as much as an 8% average dividend yield.
Two ways to earn $200 in monthly income
You can diversify your dividend portfolio across high-yielding stocks and stocks that grow their dividends regularly. Here are two ways to earn a $200 monthly income.
High-yielding REITs
SmartCentres REIT (TSX:SRU.UN) is Canada’s largest retail REIT, with over 170 properties. Most of its retail stores are in the Greater Toronto Area, which fetches higher rent. The REIT has been paying regular monthly distribution since 2008 without any cuts. It has an average distribution yield of 6%. But the current market downturn has pulled the stock price down 14%, increasing the yield to 6.55%.
The rising interest rates and looming recession is impacting real estate. This could reduce the REIT’s stock price further, but it won’t impact its rental income. Most rental income comes from essential retailers like Walmart and Walmart-anchored stores. SmartCentres will continue to redistribute its rental income to shareholders. But remember, this distribution is taxable in your hands. So, invest in SmartCentres through the Tax-Free Savings Account (TFSA), as it makes investment income and withdrawals tax-free.
Another high-yielding REIT is True North Commercial REIT, which has a distribution yield over 9%. But it is a small-cap REIT with only 46 commercial properties, making it a high-risk investment. Hence, I recommend owning this REIT alongside a large-cap REIT like SmartCentres. While SmartCentres predominantly earns income from retail stores, it is diversifying its portfolio to include mixed-use properties (residential, commercial, storage). Diversification reduces risk.
Stocks with growing dividends
While there are high-yielding stocks, there are stocks that grow their dividends every year. BCE (TSX:BCE)(NYSE:BCE) has been increasing dividends at an average annual rate of 5.5% since 2011. There are no signs of this growth slowing, as the telecom giant enjoys 5G subscriptions. Broadband and communication services are the utility of the digital world and are unlikely to be affected by the recession. BCE can afford to grow its dividends, as the expansion of network infrastructure helps it get more subscriptions.
Other utility stocks, like Canadian Utilities and Enbridge, offer regular dividend growth. You can diversify your money across these stocks. They may not give you capital appreciation, but they will keep your invested amount safer with a 10-30% upside in the long term.
Big earnings start with a small investment. Consistency pays in the long term. Stay consistent with your investment. It will reward you with income without you working for it.
