Legendary investor Warren Buffett describes Berkshire Hathaway’s investment portfolio as a “smorgasbord of businesses.” The portfolio has generated immense capital growth, and fed itself with huge annual cash flows for decades, enabling his partner Charlie Munger and him to fund new acquisitions and compound the returns. Ordinary individuals may not have the sizeable capital to execute transactions at Mr. Buffett’s levels, but a small $10,000 capital investment in TSX dividend stocks may generate more than $592 in annual passive income, and grow into a sizeable portfolio over time.
Diversification across assets and asset types is key to reducing investment risks. You may wish to add fixed-come investments to the menu as you build your own smorgasbord of businesses.
I’d deploy $10,000 in new capital to easily generate nearly $600 in annual passive income buying fixed income securities and dividend growth stocks.
Buy GICs
Fixed-income investments significantly reduce the total investment risk in your portfolio. They basically include bonds, t-bills, guaranteed investment certificates (GICs), and high-interest savings accounts (HISAs). Fixed income holdings may provide a floor for your portfolio. I’d conveniently ignore an outlier year 2022 when bond portfolios suffered similar losses and experienced volatility spikes similar to stock portfolios. The past year was just an abnormal year that may never recur during many investors’ future investment horizons.
To maintain a low-risk passive income portfolio, I would allocate, say, 40% to fixed-income assets and invest in two-year GICs that currently yield 5.6%. The $4,000 investment could pay out $$224 in annual passive income.
Target capital allocations may vary given individual risk tolerances and personal investment objectives. However, it is healthy to maintain some portfolio exposure to low-risk fixed-income assets. Individual investors need more fixed income exposure as they get older, and as investment horizons get shorter and time is more limited to recover from periodic and random stock portfolio losses.
Scoop up TELUS stock
The Canadian telecoms giant TELUS (TSX:T) fits into an income-oriented dividend growth portfolio well. TELUS is a cash-flow-generating machine that’s still growing its revenue base and keeps increasing its dividends every year. Its most recent quarterly dividend of $0.3636 per share is 7.4% higher than it was a year ago yielding over 6.2% annually. A $5,000 investment in TELUS stock could generate $310 in passive income every year.
I’d buy TELUS stock confidently given its latest strong financial performance, which may support sustainable dividend growth rates in the future.
The company reported 13% revenue growth and 36% growth in free cash flow, while increasing operating earnings year over year during the second quarter of 2023. TELUS’s thrust into digital customer experiences through TELUS International, its health services business, and agricultural and consumer goods data-driven offerings are growth drivers that may unlock positive returns for shareholders.
The $33.8 billion mature company is still capable of engineering double-digit growth rates and remains committed to raising its dividends every year, a tradition it has maintained for seven consecutive years now.
Grow With Decisive Dividend
Decisive Dividend Corp. (TSXV:DE) is a tiny $150 million nanocap monthly dividend stock that’s wildly outperforming the TSX. The tiny stock has soared by 66.7% so far this year and delivered a decisive 72.2% in total investment returns since January. Interestingly, Decisive Dividend’s monthly dividend could still yield 5.8% for new investors who buy the fast-growing industrial stock today.
The company is growing through actively acquiring targeted peers, and decisively growing its revenue, earnings, and cash flow base in the process. Revenue grew by 47% and gross earnings increased by 62% year over year during the first half of 2023. Adjusted earnings before interest, taxes, depreciation, and amortization expenses (adjusted EBITDA) soared 80%, and net income during the first half of this year was 127% higher than it was during a comparable period last year.
Most noteworthy, free cash floor per share growth of 45% year over year should support Decisive Dividend’s generous monthly dividend.
A $1,000 investment in Decisive Dividend stock could generate a $57.60 stream of annual passive income, and potentially grow in value as the company executes a successful growth strategy.
How to turn $10,000 into a $592 annual income stream
Our portfolio additions above can be summarized in the table below.
