Passive Income: How Much to Invest to Get $315 Per Month

You can earn $300 of monthly passive income by buying high-end, large-cap Canadian stocks. Here’s one way to do it.

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Many Canadians don’t realize that earning extra passive income is easier than they think. High-interest savings accounts and guaranteed investment certificates (GICs) are often the first place Canadians will look.

 Some one-year GICs are yielding close to 5% annual interest. They are not bad for short-term investments. However, these GICs tend to be non-cashable, so you have to be committed to the entire GIC term. While GICs are considered very safe, they don’t provide any additional upside to the interest you earn.

If you are long term, stocks are perfect for passive income

That is why stocks can be an attractive asset. When you buy a stock, you buy a stake in the profits and cash flows of a real business. In Canada, there are plenty of large, well-known companies that pay attractive 3-6% dividend yields. Not only do you get to collect passive income by owning their stock, but you also can participate in further upside from their earnings growth.  

The combination of capital gains and passive income can make stocks a very attractive asset. You will need to take a long-term approach because stocks can be volatile in the near term. However, it can really pay off in superior returns.

Here’s a mini portfolio that can show you how $75,000 invested in three blue-chip Canadian stocks could average $315 (or more) in monthly passive income. At the Fool, we recommend a more widely diversified portfolio than this, but this just helps demonstrate the amount of income you can earn in the stock market right now.

A diversified infrastructure stock

The first stock to consider for passive income is Brookfield Infrastructure Partners (TSX:BIP.UN). This is an attractive stock for modest growth, passive income, and defensive attributes.

It operates an array of contracted or regulated infrastructure assets (like utilities, pipelines, ports, and cell towers). This means it has a fairly clear sight lines to future cash flows. When inflation is soaring, it actually benefits because over 75% of its assets have inflation-linked earnings.

Brookfield stock pays a 4.6% dividend yield. It has grown its dividend annually by a high single-digit rate since its inception. Put $25,000 into BIP stock, and you would earn $283 of quarterly passive income, or $94.64 averaged every month.

A leading telecommunication stock

TELUS (TSX:T) is a well-known telecommunications company across Canada. Many know it for its cellular and internet services. However, many don’t know that it is a leader in healthcare, digital business services, and agriculture technologies. While those are smaller business segments, they are growing at a faster rate than the regular telecom business.

TELUS is nearing the end of an outsized infrastructure spending cycle. With that concluding, it expects to reap excess cash that it can use to de-leverage and grow its dividend rate. Right now, it targets 7-10% dividend growth for the next few years.

This passive-income stock earns a 5.2% dividend yield. A $25,000 investment would earn $320.25 per quarter, or $106.75 monthly.

An energy infrastructure stock for passive income

Pembina Pipelines (TSX:PPL) is another solid Canadian stock for passive income. It operates a large network of energy infrastructure assets (like pipelines, midstream facilities, upgraders, and export terminals) across Western Canada.

While 85% of its assets are contracted, it does get to benefit from strong energy prices by reselling its processed products. Pembina had a record year in 2022. It has a solid balance sheet, which should allow it optionality to invest in broadening its infrastructure portfolio over the decade.

This passive-income stock pays a 5.75% dividend yield. Put $25,000 into Pembina stock, and you would earn $350.40 quarterly, or $116.80 averaged every month.

Brookfield Infrastructure Partners45.78546$0.52$283.92Quarterly
Pembina Pipeline46.50537$0.6525$350.40Quarterly
Prices as of March 3, 2023

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 Robin Brown has positions in Brookfield Infrastructure Partners. The Motley Fool recommends Brookfield Infrastructure Partners, Pembina Pipeline, and TELUS. The Motley Fool has a disclosure policy.

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