Need Passive Income? Turn $6,000 Into $106 Every Month

Find the right dividend stock for stable growth and you can turn $6,000 into $106 each month!

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There are a lot of articles out there, mine included, that continue to discuss how now is an excellent opportunity to invest. It certainly is, but when it comes to creating real passive income, income that’s stable and enormous, you need the power of compounding.

Compound growth is when you see growth in value year after year after year. You’re not focusing on right now, or a few months ahead, or even three years ahead. It’s more like decades into the future.

To show you how this could create an incredible opportunity at any time, today I’m going to look at one stock and how even a small $6,000 investment could reap enormous rewards.

Start with $6,000

Let’s say you want to use some of your Tax-Free Savings Account (TFSA) contribution room this year. You want to take $6,000 and put it towards one company, then leave it alone for decades. In that time, you’ll be collecting passive income through dividends. But don’t spend it.

Instead, you’re going to use those dividends to increase your investment again and again. You’re going to put those funds directly back into your original investment, without adding any of your own money.

Over that time, you could end up creating massive monthly passive income. So let’s look at one dividend stock that could do this for you.

The North West Company

The North West Company (TSX:NWC) focuses on retail stores in rural locations. Whether’s it’s northern Canada, rural Alaska, or the Caribbean, the NorthWest company seeks to be in locations where others aren’t. This has made it basically an essential service where other stores don’t dare go.

It has also meant that NWC stock has been able to surge past earnings estimates again and again, because there aren’t other options for these locations. It already invests in stores that provide inexpensive options to customers, but even so. It’s not like you can go down the block and shop around for products in these areas.

Even so, NWC stock is down about 4% in the last year, trading at 14.7 times earnings at the time of writing. So it’s a great deal, offering a dividend at 4.15% right now as well. So you get stability, growth, and a solid dividend for passive income.

How long to reach significant passive income?

Now the big question. How long will it take that $6,000 investment to reach a significant amount of passive income?

YearShares OwnedAnnual Dividend Per ShareAnnual DividendAfter DRIP ValueYear-end Shares OwnedYear-end Stock PriceNew Balance
1163.00C$1.53C$249.54C$6,266.52169.55C$38.67C$6,556.35
2169.55C$1.58C$267.62C$6,828.10176.26C$40.53C$7,144.12
3176.26C$1.63C$286.83C$7,435.30183.11C$42.49C$7,779.64
4183.11C$1.68C$307.22C$8,091.44190.11C$44.53C$8,466.42
5190.11C$1.73C$328.86C$8,800.10197.26C$46.68C$9,208.18
6197.26C$1.78C$351.80C$9,565.05204.56C$48.93C$10,008.89
7204.56C$1.84C$376.12C$10,390.33211.99C$51.29C$10,872.76
8211.99C$1.90C$401.87C$11,280.24219.57C$53.76C$11,804.31
9219.57C$1.95C$429.15C$12,239.34227.29C$56.35C$12,808.31
10227.29C$2.02C$458.01C$13,272.49235.15C$59.07C$13,889.85
11235.15C$2.08C$488.53C$14,384.86243.15C$61.91C$15,054.35
12243.15C$2.14C$520.80C$15,581.95251.28C$64.90C$16,307.57
13251.28C$2.21C$554.90C$16,869.58259.54C$68.03C$17,655.61
14259.54C$2.28C$590.91C$18,253.97267.93C$71.31C$19,104.97
15267.93C$2.35C$628.92C$19,741.70276.45C$74.74C$20,662.56
16276.45C$2.42C$669.04C$21,339.77285.09C$78.35C$22,335.70
17285.09C$2.50C$711.34C$23,055.59293.86C$82.12C$24,132.17
18293.86C$2.57C$755.95C$24,897.04302.74C$86.08C$26,060.21
19302.74C$2.65C$802.95C$26,872.49311.75C$90.23C$28,128.59
20311.75C$2.73C$852.46C$28,990.78320.86C$94.58C$30,346.58
21320.86C$2.82C$904.58C$31,261.32330.09C$99.14C$32,724.03
22330.09C$2.91C$959.44C$33,694.07339.42C$103.92C$35,271.37
23339.42C$3.00C$1,017.16C$36,299.58348.86C$108.92C$37,999.66
24348.86C$3.09C$1,077.86C$39,089.04358.40C$114.17C$40,920.63
25358.40C$3.19C$1,141.66C$42,074.29368.04C$119.68C$44,046.66
26368.04C$3.28C$1,208.71C$45,267.88377.78C$125.45C$47,390.92
27377.78C$3.39C$1,279.15C$48,683.08387.61C$131.49C$50,967.32

After 27 years, you’ll receive $1,279 in annual passive income. That comes to monthly income of about $106.60! All from one $6,000 investment, then worth about $50,967.

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 recommends North West. The Motley Fool has a disclosure policy.

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