Passive income is cash that you can generate without exerting effort through employment or contract work. Some examples of passive income include an online retail website, income generated through a rental property, or cash brought in from a creative endeavour, such as a published novel or even a YouTube channel.
Today, I want to explore how Canadian investors can look to generate $750 per month from this point onward. For this hypothetical, we are going to play with $110,000. Theoretically, we could max out a Tax-Free Savings Account (TFSA) and stash the remaining $22,000 in a regular cash account. Let’s jump in.
Here’s the first monthly dividend stock I’d target for our passive-income portfolio
TransAlta Renewables (TSX:RNW) is the first dividend stock I want to zero in on as we look to construct a passive-income portfolio. This Calgary-based company owns, develops, and operates renewable and natural gas power-generation facilities and other infrastructure assets in Canada, the United States, and Australia. Shares of this dividend stock have dropped marginally so far in 2023.
This company released its first-quarter (Q1) fiscal 2023 earnings on May 5. TransAlta reported earnings before income taxes of $53 million — up from $49 million in Q1 fiscal 2022. EBITDA stands for earnings before interest, taxes, depreciation, and amortization. The company posted adjusted EBITDA of $128 million in Q1 2023 — down from $139 million in the previous year.
Shares of TransAlta closed at $11.30 on Wednesday, July 5. We can snatch up 3,366 shares of TransAlta for a purchase price of $38,035.80. This stock offers a monthly distribution of $0.078 per share. That represents a monster 8.3% yield. We can now generate monthly passive income of $262.54.
This undervalued REIT also offers a super dividend yield
Allied Properties REIT (TSX:AP.UN) is a Toronto-based real estate investment trust (REIT) that is a leading operator of distinctive urban workspace in major Canadian cities and network-dense urban data centre (UDC) space in Toronto. This REIT dipped marginally during the trading session on July 5. Its shares are down sharply in the year-over-year period.
Shares of this REIT closed at $21.96 on Wednesday, July 5. For our hypothetical, we can purchase 1,500 shares of Allied Properties REIT for a total price of $32,940. This REIT offers a monthly dividend of $0.15 per share, which represents a superb 8.1% yield. The investment will allow us to make monthly passive income of $225 going forward.
One more stock that can round out our passive-income strategy
Sienna Senior Living (TSX:SIA) is the third and final dividend stock I want to snatch up to complete our passive-income portfolio. This Markham-based company provides senior living and long-term-care (LTC) services throughout Canada. Its shares have increased 2.2% so far in 2023.
This stock closed at $11.29 on July 5. Our scenario allows us to purchase 3,456 shares of this dividend stock for a total price of $39,018.24. Sienna Senior Living offers a monthly distribution of $0.078 per share, representing a massive 8.2% yield. We can now generate monthly passive income of $269.56.
Bottom line
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| RNW | $11.30 | 3,366 | $0.078 | $262.54 | Monthly |
| AP.UN | $21.96 | 1,500 | $0.15 | $225 | Monthly |
| SIA | $11.29 | 3,456 | $0.078 | $269.56 | Monthly |
These investments mean we can generate monthly passive income of $757.10. That works out to an annual income of $9,085.20.
