Many investors, including me, dream of one day living off their portfolio. One way to do that comfortably is by building a passive-income portfolio and living off dividends for the rest of your life. However, that raises many questions for investors, such as, “How much do I need to invest in order to only live off dividend income?”
The answer to that question depends on the kind of life you wish to live. In 2022, it was estimated that the average U.S. consumer spends about $67,000 per year. That means your dividend portfolio would need to provide that kind of income if you’re hoping to live solely off that for the rest of your life.
To put that into perspective, a $1,000,000 portfolio with a dividend yield of 6.7% would get you the $67,000 per year you’re looking for. However, it’ll be very hard to find a 6.7% dividend yield that could be sustained over long periods. Instead, investors should aim to build a portfolio that averages a dividend yield of about 4%. In that case, investors would need a $1,700,000 portfolio to net that kind of passive income.
In this article, I’ll discuss two outstanding TSX dividend stocks that could help put you on the right track to achieve the portfolio of your dreams. By building a solid portfolio with companies such as these, you could one day give up your work life and live only off a dividend income.
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This is one of the best dividend stocks in the country
If I could only buy one dividend stock today, it would be Fortis (TSX:FTS). For those that are unfamiliar, Fortis provides regulated gas and electric utilities to more than three million customers across Canada, the United States, and the Caribbean. Because utility companies tend to charge customers on a recurring basis, their businesses and revenue streams tend to be very stable and predictable. That allows companies like Fortis to plan dividend distributions years in advance.
Fortis has taken advantage of its business model and established one of the most impressive dividend-growth streaks in the country. It has increased its dividend in each of the past 49 years, which stands as the second-longest active dividend-growth streak in the country. Fortis has already announced its plans to continue growing its dividend at a rate of 4-6% through to at least 2027.
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The Canadian banks are well known for their dividends
If you’re already exposed to the utility industry and would like to find stocks elsewhere that could provide a stable dividend, then consider investing in one of the Canadian banks. The Big Five, in particular, have established reputations as some of the best dividend-paying companies in the country. Of that group, Bank of Nova Scotia (TSX:BNS) stands out as my top pick.
This company has been paying its shareholders a portion of its earnings since July 1, 1833. That represents 190 years of continued dividend distributions. In addition, Bank of Nova Scotia currently offers investors a 6.70% dividend yield. That means, you could be well on your way to earning that $67,000 per year, if you were to buy boatloads of this stock today. Of course, no one should expect to build that kind of passive income overnight, but Bank of Nova Scotia could certainly put you on the right track.
