Motley Fool investors likely already know that long-term investing is the best way to go. This is the surest way of receiving long-term income and returns that exceed your expectations — even against growth stocks! But if you need cash quick, then a dividend stock is the way to go.
That doesn’t mean you give up on long-term investing. Instead, you collect passive income from the dividend stock to pay your debts, your bills — whatever! And then, ideally, you use that income eventually to reinvest back into the stock.
That is what we’re going to do today. I’ll show you exactly how much you would need to buy to create passive income straight away and, what’s more, a great dividend stock to consider.
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The dividend stock to consider today
One strong choice right now is, well, Choice! That’s Choice Properties REIT (TSX: CHP.UN), which holds a diverse range of real estate assets from commercial to industrial properties. Yet most of the focus tends to lean towards its mixed-use properties and Loblaw partnership.
This is why Choice stock has been such a strong dividend stock to consider. The company brings in strong revenue from its large retailer Loblaw, which, in turn, pays out rents that will keep coming in no matter what. That comes down to being a grocery chain, and it’s why real estate investment trusts (REITs) in this sector are such a strong choice during downturns for stable income.
Further, the dividend stock continues to produce solid earnings — not just because of its grocery locations but industrial ones as well. It continues to be a “high-quality name” in the words of one analyst, with a “premium valuation.” In fact, some of its retail holders have left Canada recently, marking a turn for Choice stock to perhaps make some new value retail investments. So, it might be a great time for long-term investors to get on board.
Remains valuable
Even with solid results and a strong future outlook, Choice stock remains valuable. Shares trade at 12.8 times earnings as of writing, with shares on par with where they were this time in 2022. However, shares in the dividend stock have come down recently as the economy continues to remain volatile. So, it still offers a deal on share price as well.
The dividend stock holds a yield at 5.13% as well as of writing, so you could certainly look forward to solid income. Finally, that dividend comes out on a monthly basis for investors as well!
Now for the good part. Let’s see how much you would need to invest in this dividend stock today to create strong passive income for life.
Bottom line
Let’s say you want to invest now, and reinvest your passive income for the next 10 years to create passive income of $150 per month. To do that, we have to know the compound annual growth rate (CAGR) of Choice stock for dividends and share price. In the last five years, its dividend CAGR sits at 0.33%, and its shares have a 10-year CAGR at 3.86%.
Now, we’ll look at what it would take to create that $150 in just 10 years, which would mean creating $1,800 per year.
| Year | Shares Owned | Annual Dividend Per Share | Annual Dividend | After DRIP Value | Year End Shares Owned | Year End Stock Price | New Balance |
|---|---|---|---|---|---|---|---|
| 1 | 1498.00 | $0.75 | $1,116.59 | $22,909.16 | 1573.76 | $15.09 | $23,749.33 |
| 2 | 1573.76 | $0.75 | $1,177.28 | $24,953.73 | 1650.60 | $15.67 | $25,870.46 |
| 3 | 1650.60 | $0.75 | $1,239.21 | $27,137.24 | 1728.42 | $16.28 | $28,135.84 |
| 4 | 1728.42 | $0.75 | $1,302.31 | $29,466.14 | 1807.10 | $16.91 | $30,552.18 |
| 5 | 1807.10 | $0.76 | $1,366.50 | $31,947.04 | 1886.54 | $17.56 | $33,126.36 |
| 6 | 1886.54 | $0.76 | $1,431.70 | $34,586.76 | 1966.62 | $18.24 | $35,865.44 |
| 7 | 1966.62 | $0.76 | $1,497.85 | $37,392.29 | 2047.23 | $18.94 | $38,776.70 |
| 8 | 2047.23 | $0.76 | $1,564.86 | $40,370.83 | 2128.27 | $19.67 | $41,867.61 |
| 9 | 2128.27 | $0.77 | $1,632.65 | $43,529.76 | 2209.62 | $20.43 | $45,145.85 |
| 10 | 2209.62 | $0.77 | $1,701.16 | $46,876.70 | 2291.19 | $21.22 | $48,619.33 |
By investing in 1,498 shares, you could create passive income of $150 per month in a decade. This would mean investing $21,795.90 on the TSX today in this dividend stock, with the potential to more than double that amount in a decade!
