Passive Income: How Much to Invest to Get $800 Per Month

Stock investing is one of the easiest ways to earn passive income. You can essentially get passive income without worrying about stock price volatility. That said, it’s not to say that you should ignore the price you pay for your stocks.

Some key points to keep in mind when building passive income from dividend stocks are dividend safety and stock valuation. Of course, with income being your focus, you also want stocks that have nice yields. In other words, low-yield stocks will be off your radar.

Here are some of the best Canadian stocks you could explore for juicy passive income.

TC Energy stock

TC Energy (TSX:TRP) stock has sold off more severely than its peer, Enbridge, due to cost overruns in its Coastal GasLink project. Specifically, the high-yield stock has corrected 30% from its 52-week high! In comparison, Enbridge stock is down only 15%.

Aside from inflation, the large energy infrastructure stocks are also weighed by a higher cost of capital and slow growth. However, investors can still get satisfactory returns from their dividends alone. On top of that, they can also earn whatever price appreciation is available from potential valuation expansion and future cash flow growth.

At $52.17 per share at writing, it seems investors are finding TC Energy’s 7.1% dividend very attractive and are starting to bid up the stock. Its normal earnings power typically results in a payout ratio of about 85%. Passive income investors can be further reassured by the Canadian Dividend Aristocrat’s 22 consecutive years of dividend increases.

Bank of Nova Scotia stock

There’s a gloomy cloud around bank stocks right now. Investors are scared away due to the failure of U.S. regional bank, Silicon Valley Bank, and Credit Suisse being bought by UBS on the cheap. Shareholders who bought Silicon Valley Bank or Credit Suisse shares in the last year are likely sitting on large losses. However, due to the interconnection of Credit Suisse with the global economy, the Financial Stability Board categorized it as a global systematically important bank. So, for the financial system stability, it’s probably a good thing that UBC is buying Credit Suisse. In any case, the whole scenario is making investors lose confidence in bank stocks.

Bank of Nova Scotia (TSX:BNS) stock, in particular, is down about 29% from its 52-week high. It yields the highest income among its large Canadian bank peers. It offers a yield of 6.2% at $66.85 per share at writing.

Despite the doom and gloom backdrop, investors can count on Scotiabank paying out its dividend. First, it has paid dividends every year since 1833. Second, it has not cut its common stock dividend since 1942, the middle of World War II. Third, the international bank is highly profitable and normally maintains a payout ratio of around 50% of earnings. Surely, its payout ratio will be higher than normal during recessionary periods, but it would still be able to maintain its dividend then.

How much to invest to get $800 per month

Both stocks offer high yields and also have dividend-growth potential. TC Energy and Scotiabank can increase their dividends annually by about 3% and 5%, respectively, over the next few years.

To earn $800 per month (or $9,600 per year) from each stock, you’ll need to buy approximately the number of shares shown in the table. To earn $400 per month (or $4,800 per year) from each, divide the number of shares by two.