Need Passive Income? Here’s How I’m Getting $1,701/Year

I’m getting passive income from dividend stocks like Toronto-Dominion Bank (TSX:TD).

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In a recent series of articles, I’ve explored my plan to get to $2,000 per year in passive income by the end of 2023. When I started the series, my brokers reported that I had $1,200 per year in tax-free passive income. Today, I’m at $1,701. By adding a few new investments as well as selling some old ones that didn’t pay dividends and re-investing the proceeds into dividend stocks, I’ve increased my annual passive income by $500/year. In this article, I will explain how I did it.

Dividend stocks

The main thing I’ve done in the last two months to increase my annual passive income was to invest in dividend stocks — notably, Toronto-Dominion Bank (TSX:TD) and Bank of America (NYSE:BAC). These are two bank stocks that I hold in my Registered Retirement Savings Plan (RRSP) and Tax-Free Savings Account (TFSA).

TD Bank stock yields about 4%. Bank of America yields 2.5%. Currently, I own 137 shares of TD Bank and 260 shares of Bank of America, resulting in $830.2 in annual dividend income from these two stocks. Below is a series of tables showing how the math on that works out.

Table #1: TD and Bank of America dividends

TD dividend per share (annual)$3.84
Bank of America dividend per share (annual)$1.17 (converted from US$0.88)
Number of TD shares I own137 ($526 in dividends per year)
Number of BAC shares I own260 ($304 in dividends per year)

Table #2: The math

Quarter 1Quarter 2Quarter 3Quarter 4Full year
TD Bank dividends $131.5$131.5$131.5$131.5$526
Bank of America dividends$76.05$76.05$76.05$76.05$304.2

So, that’s $830.2 per year in dividends just from TD and Bank of America. Plus, I own a variety of smaller dividend positions (both stocks and funds) that take the dividend income to $1,200. If you’re wondering how I got the total up to $1,700, read on, because in the next section, I’ll show where my passive income is coming from, apart from dividends.

Guaranteed Investment Certificates (GICs)

Apart from dividends, I also get some passive income from GICs. These are fixed-income investments that you buy from banks. Historically, they haven’t yielded much, but this year, you can find GICs yielding up to 5%. I currently have two 5% yielding GICs in my portfolio, one from EQB and one from Bank of Nova Scotia. Together, they add about $500 in projected annual income to my portfolio.

Foolish takeaway

So, there you have it. The way I got to $1,700 in annual passive income was by diligently investing in dividend stocks, funds, and GICs. It took me several years of saving to get this amount, but I got there.

The big takeaway here is that passive income is obtainable, but you’ll have to save a fair amount of money to get it. The portfolios that are paying me $1,700 per year are worth about $92,000 combined, so you’ll need to invest a fair amount of money to get a lot of dividend income coming in. Over a period of several years, it’s very doable. Just don’t expect a miracle overnight.

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.

Bank of America is an advertising partner of The Ascent, a Motley Fool company. Fool contributor Andrew Button has positions in Toronto-Dominion Bank. The Motley Fool recommends Bank Of Nova Scotia, Bank of America, and EQB. The Motley Fool has a disclosure policy.

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