How to Maximize the Safe Passive Income You Can Make With $5,000

You can bring in superior passive income with $5,000 right now, and look forward to shares returning to 52-week highs with this dividend stock.

| More on:
Various Canadian dollars in gray pants pocket

Image source: Getty Images

Canadians seeking out passive income need to be careful. While dividend stocks are great, we’re about to enter a recession. This could lead to many dividend stocks cutting their dividends to create income needed to recover after a downturn.

That’s why today, I’m going to focus on safe passive income. If your focus is on creating that passive income for the near term and growth in the long term, then here is exactly what I would do.

First, how much will you invest?

You don’t want your investment to suddenly turn to ash, which is why I’m suggesting an amount around $5,000. That’s a large sum, but, again, we’re investing in a safe stock. So, it’s not going to drop down to nothing. That means you can take it out if need be in the near future, though, of course, investing for the long term is always best.

Now, if $5,000 doesn’t work for your budget, that’s fine! Instead, do what works for you and your savings. Just because I’m using this as an example doesn’t mean you have to. Instead, I’ll merely provide it as an example as to how much passive income you can make with that amount.

Where to invest

There are certainly safe industries across the market, and ones that should continue trading quite well. But if you’re looking at passive income, then you want something you can get for a deal. But it’s safe income, so you want to make sure that dividend stock will recover.

That’s why I would recommend the Big Six banks. These are all strong companies that have recovered over every recession. What’s more, they have provisions for loan losses, so they can rebound to pre-drop prices after hitting 52-week lows within a year’s time. That’s exactly what has happened time and again with Canadian Imperial Bank of Commerce (TSX:CM).

CIBC stock is down 29% in the last year alone, trading at 11.24 times earnings as of writing. It’s now not only a cheap stock in terms of fundamentals but also because of a stock split last year. This now makes it the cheapest by share price of the banks right now. So, let’s now look at how much passive income you can bring in.

Making that passive income

If you have $5,000 to invest, then now is a great time to put it to work. Shares will eventually head back towards 52-week highs for CIBC stock, so now is a great time to get in on a deal. CIBC stock holds a dividend yield 6% as of writing. So, here is what you can bring in now and how much you could turn that $5,000 into at 52-week highs.

CM – lows$56.8788$3.40$299.20quarterly$5,000
CM – highs$71.8988$3.40$299.20quarterly$6,326.32

When shares return to 52-week highs, investors could have returns of $6,326.32 buying at today’s lows. Furthermore, they can bring in $299.20 annually in passive income!

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 positions in Canadian Imperial Bank Of Commerce. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Dividend Stocks

bulb idea thinking
Dividend Stocks

TFSA Investors: 2 High-Yield TSX Stocks With Great Dividend Growth

These top Canadian dividend-growth stocks now trade at discounted prices.

Read more »

Businessperson's Hand Putting Coin In Piggybank
Dividend Stocks

How Much Can You Really Earn in Passive TFSA Income?

With a diversified portfolio of high yield stocks like Enbridge (TSX:ENB) you could potentially get up to $4,400 per year…

Read more »

data analyze research
Dividend Stocks

2 Stocks to Invest in a Sideways Economy

Not all stocks are equally vulnerable to the weak economy and market, and the right stable investments can help you…

Read more »

Value for money
Dividend Stocks

Why Canadian Investors Should Add This Value Stock to Their Portfolios

This value stock is down now, but this comes all from outside impacts. A year from now, you'll likely wish…

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

This 7.1% Dividend Stock Pays Serious Cash

After the pullback, Enbridge stock offers a compelling dividend yield of almost 7.1% It's a good consideration for passive income.

Read more »

stock research, analyze data
Dividend Stocks

3 TSX Stocks With Unbeatable Passive Income and Bargain Prices

Three TSX stocks trading at bargain prices are buying opportunities for their relatively safe and sustainable dividend payments.

Read more »

value for money
Dividend Stocks

3 Cheap Dividend Stocks Paying up to 10%

Income-seeking investors can consider buying shares of high-dividend stocks with monthly payouts, such as Slate Grocery REIT.

Read more »

Senior couple at the lake having a picnic
Dividend Stocks

Retirees: Here’s How to Boost Your CPP Pension

The CPP can only cover a portion of your daily expenses. Take control of your pension, and boost the $811…

Read more »