TFSA Investors: How to Create $40,000 in Returns and Passive Income in 30 Years

If you think you’ll need just $40,000 in passive income per year in retirement, your TFSA can get you there — even by investing small amounts in one company.

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Before I begin, I have to give a warning. This article is merely an example of how great drip-feeding into a stock can be. By this, I mean DRIP, the dividend-reinvestment plan. You can use any passive income you receive from dividends and re-invest this back into your original investment. By doing this over long periods of time, you can create a massive amount of returns and income.

Today, I’m going to provide you with a strong example. I say strong because I’m using a Dividend Aristocrat that’s been around for decades’ worth of returns. Aristocrats are dividend companies that have increased their dividends each year for the last 25 years.

Today, the stock I’m going to focus in on is BCE (TSX:BCE).

The numbers to back this up

BCE stock hit the scene in 1964. It was named after the inventor of the telephone, Alexander Graham Bell. The company has since become the largest telecommunications company in the country. There aren’t many telecom companies in Canada to begin with, but among them, BCE stock is the largest.

In the last 10 years, BCE stock has seen shares rise 28%. However, take into consideration that in that time, we’ve seen a drop from both the pandemic as well as the recent downturn. If we zoom out further, we can see that BCE stock has actually grown 96% in that time. That’s a compound annual growth rate (CAGR) of 3.42%.

Meanwhile, its dividend currently sits at 6.54%, handed out at $3.87 per year, dished out quarterly. In the last 20 years, it’s grown by 229%, growing at a CAGR of 6.13%.

Why all these numbers?

These numbers are important if you’re looking to support your income in the next three decades through this investment. You need to know how much shares and dividends are likely to grow in that time. Now, we can get to the good part.

The only other thing you need to aim for is creating $40,000 per year in 30 years. Let’s assume you want this amount coming out for 30 years after. That means you need an ultimate goal of $1.2 million in your portfolio by that time.

YearShares OwnedAnnual Dividend Per ShareAnnual DividendAfter DRIP ValueAnnual ContributionYear End Shares OwnedYear End Stock PriceNew Balance
1251.00C$3.90C$979.34C$15,978.28C$5,500.00353.72C$63.32C$22,396.23
2353.72C$4.02C$1,423.17C$23,853.68C$5,500.00457.25C$67.20C$30,726.57
3457.25C$4.15C$1,897.15C$32,668.09C$5,500.00561.59C$71.32C$40,051.63
4561.59C$4.28C$2,402.77C$42,509.00C$5,500.00666.73C$75.69C$50,464.16
5666.73C$4.41C$2,941.57C$53,470.66C$5,500.00772.62C$80.33C$62,064.12
6772.62C$4.55C$3,515.14C$65,654.62C$5,500.00879.25C$85.25C$74,959.15
7879.25C$4.69C$4,125.07C$79,170.12C$5,500.00986.58C$90.48C$89,265.12
8986.58C$4.84C$4,773.01C$94,134.70C$5,500.001094.57C$96.03C$105,106.65
91094.57C$4.99C$5,460.67C$110,674.63C$5,500.001203.17C$101.91C$122,617.67
101203.17C$5.14C$6,189.75C$128,925.58C$5,500.001312.34C$108.16C$141,942.05
111312.34C$5.31C$6,962.04C$149,033.18C$5,500.001422.03C$114.79C$163,234.23
121422.03C$5.47C$7,779.31C$171,153.68C$5,500.001532.18C$121.83C$186,659.94
131532.18C$5.64C$8,643.42C$195,454.61C$5,500.001642.74C$129.29C$212,396.86
141642.74C$5.82C$9,556.25C$222,115.56C$5,500.001753.65C$137.22C$240,635.49
151753.65C$6.00C$10,519.71C$251,328.92C$5,500.001864.84C$145.63C$271,579.87
161864.84C$6.19C$11,535.77C$283,300.69C$5,500.001976.26C$154.56C$305,448.54
171976.26C$6.38C$12,606.42C$318,251.41C$5,500.002087.84C$164.03C$342,475.40
182087.84C$6.58C$13,733.71C$356,417.02C$5,500.002199.52C$174.09C$382,910.76
192199.52C$6.78C$14,919.72C$398,049.90C$5,500.002311.22C$184.76C$427,022.33
202311.22C$6.99C$16,166.59C$443,419.89C$5,500.002422.90C$196.09C$475,096.36
212422.90C$7.21C$17,476.49C$492,815.41C$5,500.002534.47C$208.11C$527,438.81
222534.47C$7.44C$18,851.65C$546,544.64C$5,500.002645.88C$220.86C$584,376.64
232645.88C$7.67C$20,294.34C$604,936.81C$5,500.002757.06C$234.40C$646,259.10
242757.06C$7.91C$21,806.88C$668,343.47C$5,500.002867.94C$248.77C$713,459.15
252867.94C$8.16C$23,391.64C$737,139.96C$5,500.002978.46C$264.02C$786,375.00
262978.46C$8.41C$25,051.05C$811,726.91C$5,500.003088.57C$280.20C$865,431.70
273088.57C$8.67C$26,787.60C$892,531.84C$5,500.003198.19C$297.38C$951,082.80
283198.19C$8.94C$28,603.82C$980,010.84C$5,500.003307.28C$315.61C$1,043,812.21
293307.28C$9.22C$30,502.32C$1,074,650.41C$5,500.003415.76C$334.96C$1,144,136.10
303415.76C$9.51C$32,485.75C$1,176,969.38C$5,500.003523.59C$355.49C$1,252,604.93

As you can see, after 30 years, you’ll have $1.252 million in your account! This comes from 252 shares, or a $15,000 investment as of writing. Then you simply add $5,500 per year to reach this ultimate goal. You’d then have $40,000 per year available for another 30 years, tax free!

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 Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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