How to Build a Powerful Passive-Income Portfolio With Just $20,000

Canadians can look to build a rock-solid, passive-income portfolio with high-yield monthly dividend stocks like Freehold Royalties Ltd. (TSX:FRU).

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The Canadian market has faced some turbulence in the second half of the spring season. Investor anxiety has increased in the face of rising interest rates and continued murmurs of a potential recession. Instead of resigning ourselves to worry, we can take the initiative and build a passive-income portfolio in the final weeks of the spring.

In this article, I want to explore how you can build that portfolio with just $20,000 in late May 2023. In this hypothetical, we should aim to stash our dividend stocks in a Tax-Free Savings Account (TFSA). Let’s jump in.

Here’s why Freehold Royalties is the perfect stock to start a passive-income portfolio

Freehold Royalties (TSX:FRU) is the first dividend stock I’d target to build our passive-income portfolio in the spring of 2023. This Calgary-based company is engaged in the acquisition and management of royalty interest in the crude oil, natural gas, natural gas liquids, and potash properties in Western Canada and the United States. Its shares have dropped 2.7% so far in 2023.

This energy stock boasts a phenomenal track record as a dividend payer. Its royalty business has generated consistent cash flow that has supported its monthly distribution. This stock currently possesses a favourable price-to-earnings (P/E) ratio of 10.

Shares of Freehold closed at $14.67 on Friday, May 19. For our hypothetical, we can snatch up 450 shares of Freehold for a purchase price of $6,601.50. Freehold Royalties offers a monthly dividend of $0.09 per share. That represents a very tasty 7.3% yield. This means we can now gobble up tax-free monthly passive income of $40.50 going forward.

This undervalued REIT also offers a monster dividend right now

Artis REIT (TSX:AX.UN) is a Winnipeg-based real estate investment trust (REIT) that possesses a portfolio of industrial, office, and retail properties in North America. Shares of this REIT have dropped 0.5% month over month as of close on May 19. The REIT is down 22% in the year-to-date period.

In the first quarter (Q1) of fiscal 2023, this REIT saw revenues drop 3.2% year over year to $90.2 million. Moreover, net operating income dropped 6.6% to $48.0 million.

This REIT closed at $7.10 per share after markets closed last Friday. We can purchase 940 shares of Artis REIT for a total price of $6,674. The REIT currently offers a monthly distribution of $0.05 per share, which represents a monster 8.6% yield. This purchase will allow us to churn out monthly tax-free passive income of $47.

One more monthly dividend stock to round out your passive-income portfolio

Sienna Senior Living (TSX:SIA) is the last dividend stock I’d target to complete our passive-income portfolio. This Markham-based company provides senior living and long-term-care services in Canada. Its shares have climbed 4.3% so far in 2023.

Shares of Sienna Senior Living closed at $11.52 on May 19. For our final purchase, we can gobble up 580 shares of Sienna Senior Living for $6,681.60. This stock last paid out a monthly distribution of $0.078 per share, representing an 8.1% yield at the time of this writing. After this purchase, we can count on a monthly, tax-free, passive-income payout of $45.24.

Bottom line


These investments will allow us to churn out monthly, tax-free, passive income of $132.74. That works out to annual income of $1,592.88 from our original $20,000 investment.

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 Ambrose O'Callaghan has no position in any stocks mentioned. The Motley Fool recommends Freehold Royalties. The Motley Fool has a disclosure policy.

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