Passive Income: How Much Should You Invest to Earn $1,000 Each Month?

TSX dividend stocks such as Northwest Healthcare offer investors generous payouts, allowing you to create a passive-income stream.

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As inflation refuses to cool down, Canadians are finding it difficult to lower their expenses and increase savings. One way to increase savings and accelerate retirement plans is by creating multiple income streams. Owning a portfolio of high-yield, quality dividend stocks allows you to create a passive-income stream with a small amount of capital.

So, let’s see how these three TSX stocks can help you earn $1,000 in dividend income each month.

Northwest Healthcare stock

Down 40% from all-time highs, Northwest Healthcare REIT (TSX:NWH.UN) currently offers you a tasty dividend yield of 9.6%. In the last 10 years, shares of the REIT (real estate investment trust) have declined by 33%. However, if you include dividends, total returns are closer to 37%.

Northwest Healthcare provides investors exposure to a portfolio of healthcare properties in Canada, Europe, and Australia. The healthcare sector is fairly recession resistant, allowing Northwest to generate cash flows and earnings across business cycles.

It pays investors a monthly dividend and ended 2022 with a payout ratio of less than 70%, which is quite sustainable.

TransAlta Renewables stock

One of the largest clean energy companies on the TSX, TransAlta Renewables (TSX:RNW) has a dividend yield of 7.8%. Despite a difficult macro-environment, TransAlta Renewables increased adjusted earnings before interest, tax, depreciation, and amortization by 5% to $487 million while free cash flow stood at $347 million. So, RNW stock is trading at 10 times trailing cash flows, which is cheap.

Northwest Healthcare REIT$8.604,948$0.067$331Monthly
TransAlta Renewables$12.043,534$0.078$276Monthly
Fiera Capital$7.865,414$0.215$1,164Quarterly

TransAlta Renewables increased renewable power production by 326 gigawatts year over year in 2022 due to the additions of the Windrise wind facility and the North Carolina Solar facility as well as higher wind resources in the Americas. These investments should help the company increase its dividend over time.

In addition to its tasty dividend yield, RNW stock is priced at a discount of 15% to consensus price target estimates.

Fiera Capital stock

The final high dividend stock on my list is Fiera Capital (TSX:FSZ), an alternative asset management company. Valued at a market cap of $800 million, the TSX stock pays investors an annual dividend of $0.86 per share, translating to a forward yield of 11%.

Typically, asset managers such as Fiera Capital generate revenue from management fees and performance fees, which, in turn, depend on the assets under management, or AUM. During bear markets, the AUM is likely to reduce as investors pull out funds and invest them in lower-risk assets, such as gold.

Since the end of 2021, FSZ stock has lost close to 50% in market value, as analysts expect the company’s profit margins to narrow. But as market sentiment improves, adjusted earnings are forecast to expand from $1.17 per share in 2022 to $1.27 per share in 2024. So, the TSX stock is priced at 6.2 times forward earnings, which is very cheap.

Fiera Capital is also trading at a discount of 18% to consensus price target estimates.

The Foolish takeaway

The average yield on the three TSX dividend stocks is around 9.4%. So, a total investment of $127,660 distributed equally in these three stocks will help you earn $1,000 in monthly dividend income. Additionally, the three companies are also priced at a discount to consensus target estimates and are well poised to generate wealth via long-term capital gains, too.

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 Aditya Raghunath has positions in TransAlta Renewables. The Motley Fool recommends Fiera Capital and NorthWest Healthcare Properties Real Estate Investment Trust. The Motley Fool has a disclosure policy.

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