Near the start of this year, I wrote that I had a plan to get to $2,000 per year (or $166 per month) in passive income. I’m happy to say that I have (arguably) hit that goal! According to my brokerage account, I will earn the following sums in passive income in the next 12 months:
- RRSP: $1,571
- TFSA: $488
These amounts sum to $2,059, so I’ve technically hit my goal! The reason I say “technically” is because a fair bit of my passive income is from GICs that don’t renew. So, it’s not passive income that comes in permanently — I may choose to do something different with the money later.
Nevertheless, I’ve hit my passive-income goal, according to my broker, and I should hit the goal of $2,000 in dividends alone by the end of the year.
Bank stocks make up the majority of my passive income
The majority of the passive income I’m getting these days comes from bank stocks — specifically, Toronto-Dominion Bank (TSX: TD) and Bank of America (NYSE: BAC).
I like these banks for different reasons.
With TD Bank, I have a certain affinity for the company because it’s my personal bank. As far as TD the company goes, I’m impressed with its push into the U.S., a market that now accounts for 38% of its net income. Recently, TD’s U.S. growth plans were thwarted when its First Horizon deal got cancelled. The deal was seen as a positive by management, but many shareholders — including me — took it as a negative. It appears that U.S. regulators blocked TD’s deal over concerns about its anti-money laundering practices. At any rate, TD did manage to close its Cowen deal, so it can still do U.S. deals in investment banking.
With Bank of America, my reasons for liking the stock are quite different. BAC is a stock beloved by value investors, mainly because of its conservatism and strong brand. Its strict lending practices help it to not go bust like some U.S. banks have, while its strong brand name help it attract and retain customers. The company is currently a true bargain, trading at just 8.3 times earnings and 0.86 times book value. It has a 3.2% dividend yield. I’ve been adding to this position all year long, and I’m hoping to add more still.
GICs: An ever-larger component
Next up, we have GICs. These are the second-biggest contributor to my passive income after dividends. GICs are short-term investments that pay you back in a lump sum once they mature. Currently, I have about $700 worth of returns from GICs set to clear in the next year. Unlike dividend stocks, GICs don’t pay out money indefinitely, but they are a form of passive income that keeps coming in whether the stock market goes up or down.
Foolish takeaway
After four-and-a-half years of saving, my journey to $2,000 in annual passive income is complete. With stocks and GICs combined, I’ve hit the mark. Getting to $2,000 in recurring passive income with dividends and bond funds will take more time. But I’m confident I’ll get there eventually.
