Passive income is something every investor is interested in, especially right now. Today, I’m going to show you just how much you can lock in — first, by investing to create $500 per year and eventually moving up to $500 per month.
Find the right stock
If you’re looking for a passive-income stock, you’ll want a strong, monthly payer that’s bound to be around within the next decade. Today, I’m going to focus on Peyto Exploration & Development (TSX:PEY). The main reason? The company has an incredibly high dividend yield at 10.73% as of writing. Yet it remains in value territory trading at 6.3 times earnings.
Of course, part of the reason this stock has a high yield and cheap price is, it’s in the oil and gas sector. This sector had a wild ride in the last year, but the company is starting to show improvements in the last few months. Passive-income seekers wanting more returns and a lock-up of this yield should do so soon.
Start off with $500 per year
To start, let’s say you’re an investor who wants to create $500 in passive income each year. Right now, Peyto stock’s 10.73% dividend yield comes to $1.32 per share annually. This would mean to create $500 in income annually, you would need about 378 shares.
Here’s how that works out below in terms of how much you would need to invest as well.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
| PEY | $12.59 | 378 | $1.32 | $500 | Annually | $4,759.02 |
As you can see, to create that $500 per year, an investment of $4,759 doesn’t really break the bank. However, it might if you’re seeking $500 per month. Let’s look at how much you’d need to invest to get there.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
| PEY | $12.59 | 4,545 | $1.32 | $500 | Monthly | $57,221.55 |
Making it monthly
As you can see, that’s a far larger investment. Now, if you were to reinvest that $500 each year, let’s see how long it would take to reach $500 per month in passive income. From there, you decide to put an additional $1,500 into Peyto stock. Based on its historical data, it would take 23 years to reach $6,003 in annual passive income, or $500 each month.
|
Year |
Shares Owned |
Annual Dividend Per Share |
Annual Dividend |
After DRIP Value |
Annual Contribution |
Year End Shares Owned |
Year End Stock Price |
New Balance |
|
1 |
378 |
$1.34 |
$505.41 |
$5,289.77 |
$1,500.00 |
523.71 |
$13.94 |
$7,298.98 |
|
2 |
523.71 |
$1.36 |
$714.23 |
$8,046.14 |
$1,500.00 |
669.36 |
$15.43 |
$10,327.13 |
|
3 |
669.36 |
$1.39 |
$931.13 |
$11,297.71 |
$1,500.00 |
814.01 |
$17.08 |
$13,902.72 |
|
4 |
814.01 |
$1.42 |
$1,155.00 |
$15,102.73 |
$1,500.00 |
956.82 |
$18.91 |
$18,090.32 |
|
5 |
956.82 |
$1.45 |
$1,384.78 |
$19,524.73 |
$1,500.00 |
1097.02 |
$20.93 |
$22,960.39 |
|
6 |
1097.02 |
$1.48 |
$1,619.45 |
$24,633.23 |
$1,500.00 |
1233.96 |
$23.17 |
$28,589.99 |
|
7 |
1233.96 |
$1.51 |
$1,858.03 |
$30,504.39 |
$1,500.00 |
1367.09 |
$25.65 |
$35,063.51 |
|
8 |
1367.09 |
$1.54 |
$2,099.65 |
$37,221.76 |
$1,500.00 |
1495.93 |
$28.39 |
$42,473.56 |
|
9 |
1495.93 |
$1.57 |
$2,343.49 |
$44,877.23 |
$1,500.00 |
1620.13 |
$31.43 |
$50,921.91 |
|
10 |
1620.13 |
$1.60 |
$2,588.82 |
$53,571.91 |
$1,500.00 |
1739.41 |
$34.79 |
$60,520.55 |
|
11 |
1739.41 |
$1.63 |
$2,835.00 |
$63,417.22 |
$1,500.00 |
1853.56 |
$38.52 |
$71,392.92 |
|
12 |
1853.56 |
$1.66 |
$3,081.47 |
$74,536.08 |
$1,500.00 |
1962.45 |
$42.64 |
$83,675.13 |
|
13 |
1962.45 |
$1.70 |
$3,327.76 |
$87,064.22 |
$1,500.00 |
2066.03 |
$47.20 |
$97,517.45 |
|
14 |
2066.03 |
$1.73 |
$3,573.47 |
$101,151.56 |
$1,500.00 |
2164.29 |
$52.25 |
$113,085.92 |
|
15 |
2164.29 |
$1.76 |
$3,818.29 |
$116,963.86 |
$1,500.00 |
2257.27 |
$57.84 |
$130,564.05 |
|
16 |
2257.27 |
$1.80 |
$4,061.97 |
$134,684.44 |
$1,500.00 |
2345.05 |
$64.03 |
$150,154.80 |
|
17 |
2345.05 |
$1.84 |
$4,304.32 |
$154,516.12 |
$1,500.00 |
2427.74 |
$70.88 |
$172,082.69 |
|
18 |
2427.74 |
$1.87 |
$4,545.22 |
$176,683.34 |
$1,500.00 |
2505.49 |
$78.47 |
$196,596.19 |
|
19 |
2505.49 |
$1.91 |
$4,784.60 |
$201,434.52 |
$1,500.00 |
2578.46 |
$86.86 |
$223,970.31 |
|
20 |
2578.46 |
$1.95 |
$5,022.42 |
$229,044.68 |
$1,500.00 |
2646.83 |
$96.16 |
$254,509.50 |
|
21 |
2646.83 |
$1.99 |
$5,258.71 |
$259,818.30 |
$1,500.00 |
2710.79 |
$106.45 |
$288,550.82 |
|
22 |
2710.79 |
$2.03 |
$5,493.52 |
$294,092.52 |
$1,500.00 |
2770.55 |
$117.83 |
$326,467.46 |
|
23 |
2770.55 |
$2.07 |
$5,726.91 |
$332,240.64 |
$1,500.00 |
2826.31 |
$130.44 |
$368,672.66 |
You’ll also notice you now have a portfolio worth $368,672.66 based on this historical performance! In the case of Peyto stock, I want to mention that this company has cut its dividend in the past. So, I wouldn’t exactly call it the safest and most secure investment for dividend passive income. That being said, it’s a great example to show how you can lock up long-term passive income for years.
