How I’d Invest $300 a Month to Target a $3,000 Yearly Passive Income

Stocks can be a good source of passive income. All you need is to regularly invest in dividend stocks and rebalance them periodically.

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Many Canadians adjusted their spending habits in April 2022 as inflation made things unaffordable. A Statistics Canada survey showed that 24% of Canadians had to access their savings, and 27% had to borrow from friends and relatives to meet their expenses. Well, these are tough times. While inflation has slowed, prices are still 4.4% higher than last year, as per April 2023 inflation statistics. Times like these remind us how important it is to have passive income. 

Saving hacks to get you started on investing $300 

When the going gets tough, the tough gets going. How can one even think of investing in stocks when living paycheck to paycheck? Delaying investments saying I’ll do it when I have a surplus could cost you more. When you have surplus others have a surplus too. If everyone is investing in stocks at the same time, you land up buying stocks at a higher rate, reducing your upside. 

Let’s take an everyday example. Why do you delay purchases for the end-of-season sale? Because the demand for those products slows and you can get the same quality product at a much cheaper price. Similarly, you invest in stocks not when you have a surplus but when the market demand is slow. But how do you get the money to invest in stocks? 

You can use the savings jar hack. You take a jar and put any change or petty cash, or pay yourself for completing a task. For instance, you bought a meal and gave a $10 note, and the cashier gave you $4 in change. Put that change in the savings jar. You set a goal to wax the floor. Pay yourself $5-$10 after doing the job. You did a small gig over the weekend, perhaps tutored someone, waited tables, or walked the neighbor’s dog. Put that money in the savings jar. On the 30th of the month, count your money in the savings jar. 

Even if you add $10 daily in the jar, you accumulate $300 by the end of the month. And none of this money came from your paycheck.

Investment strategy to earn $3,000 in annual passive income

If you count a $300 monthly investment as an expense, you can bring investing discipline. Now how to use this $300. You aim to earn passive income, so the best source is dividend stocks and REITs that give at least a 5% dividend yield. 

YearInvestmentInvestment Return @ 5%Total Amount
2023$3,600 $3,600.0
2024$3,600$180.0$7,380.0
2025$3,600$369.0$11,349.0
2026$3,600$567.5$15,516.5
2027$3,600$775.8$19,892.3
2028$3,600$994.6$24,486.9
2029$3,600$1,224.3$29,311.2
2030$3,600$1,465.6$34,376.8
2031$3,600$1,718.8$39,695.6
2032$3,600$1,984.8$45,280.4
2033$3,600$2,264.0$51,144.4
2034$3,600$2,557.2$57,301.7
2035$3,600$2,865.1$63,766.7
2036 $3,188.3$66,955.1
Invest $300/month for $3,000/year passive income

You can shortlist four stocks with an over 5% yield and invest $300 for three months in one stock. Invest at a time when the stock is trading closer to its 52-week low or the dividend yield is greater than 5%. If you reinvest the dividend income and maintain your portfolio’s yield at 5%, your $300/month can convert to $3,000/year in the 13th year. 

A passive income stock to lock in a 5%-plus dividend yield 

You can invest $300 in Rogers Sugar (TSX:RSI) in May and lock in a 6.1% dividend yield. The stock is trading at $5.90, which means you can buy 50 shares that pay a $0.36 dividend in four equal quarterly instalments. Your 50 shares can earn you $18 in annual dividends. 

A sugar stock is relatively stable and fluctuates when supply falls short. Sugar is used in confectionery and daily consumption. Its demand is unaffected by economic factors. Rogers Sugars is a good passive income stock to buy below $6. 

The company has slashed dividends in the past and reduced the frequency. So if the company reduces its dividends, you can sell the stock whenever it reaches $6. You can use that money to buy other stocks with a 5% yield. 

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 Puja Tayal has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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