Wouldn’t it be nice to get a regular paycheck, maybe quarterly or annually, without working for it? If you invest your money today and let it grow for 10 years, it could pay you around $9,500/year. That is the power of passive income. And this income comes from dividend stocks.
This top dividend stock is a good option for passive income
BCE (TSX:BCE) is a top dividend stock with a history of paying regular dividends with no cuts. The telecom operator even normalized its dividend growth in 2013, increasing it once a year. Since then, the stock has grown its dividend annually by 5%. The stability came after the 4G technology increased the wireless revenue. The telco has now moved to 5G technology, which will create more revenue streams, as artificial intelligence (AI) takes prominence.
You generally buy BCE shares above $60. In return, you get access to its $3.87 annual dividend per share. But the stock has slipped 25% since April 2022, when the interest rate hike began. You can take this opportunity and access the $3.87 annual dividend for just $53.8, which translates into a 7.2% yield.
How to buy 734 shares of BCE
If you have $39,500, you can buy 734 BCE shares today as the stock trades at its 52-week low and automate your investment with a dividend-reinvestment plan (DRIP). BCE offers a DRIP, wherein it gives you BCE shares worth the dividend amount for a discounted price. Every quarter, BCE pays dividends and declares the DRIP stock price.
| BCE DRIP Price 3.2% CAGR* | Investment | BCE DRIP Shares | BCE Share count | BCE Dividend per share (5% CAGR) | Total dividend |
| $53.80 | $39,500.00 | 734.0 | 734.0 | $3.87 | $2,840.58 |
| $55.52 | $2,840.58 | 51.2 | 785.2 | $4.06 | $3,190.50 |
| $57.30 | $3,190.50 | 55.7 | 840.8 | $4.27 | $3,587.61 |
| $59.13 | $3,587.61 | 60.7 | 901.5 | $4.48 | $4,038.80 |
| $61.02 | $4,038.80 | 66.2 | 967.7 | $4.70 | $4,552.07 |
| $62.98 | $4,552.07 | 72.3 | 1040.0 | $4.94 | $5,136.68 |
| $64.99 | $5,136.68 | 79.0 | 1119.0 | $5.19 | $5,803.41 |
| $67.07 | $5,803.41 | 86.5 | 1205.5 | $5.45 | $6,564.75 |
| $69.22 | $6,564.75 | 94.8 | 1300.4 | $5.72 | $7,435.27 |
| $71.43 | $7,435.27 | 104.1 | 1404.5 | $6.00 | $8,431.93 |
| $73.72 | $8,431.93 | 114.4 | 1518.8 | $6.30 | $9,574.56 |
For instance, BCE declared a $0.9675 quarterly dividend, payable on July 15, and a DRIP price of $56.8246. If you own 734 BCE shares, that accumulates $710.14 in dividends that you will get 12.49 DRIP shares. A DRIP compounds your returns and accumulates shares without any brokerage. In the above table, I have taken annual figures and an estimated DRIP stock price. Hence, the table could differ from your actual quarterly income.
The table is to give you an idea of how DRIP compounds passive income. Assuming your BCE DRIP shares grow as per the above table, your share count will almost double in 11 years and give you $9,574 in yearly passive income on the $39,500 investment you made today.
How can BCE stock earn you $4,600 in yearly passive income?
If you can’t invest $39,500 now, you can invest $333/month and benefit from dollar-cost averaging. Here, you invest $4,000 every year and add the dividend income. Assuming BCE keeps growing its dividend at 5%, and its share price grows by 3.2% per year, you can buy 734 shares for $44,000 and earn $4,627 in yearly passive income.
| Year | BCE Stock Price 3.2% CAGR* | Annual Investment | New BCE Shares | BCE Share count | BCE Dividend per share (5% CAGR) | Total dividend |
| 2024 | $55.00 | $4,000.00 | 73.0 | 73.0 | $3.87 | $282.51 |
| 2025 | $56.76 | $4,282.51 | 75.0 | 148.0 | $4.06 | $601.40 |
| 2026 | $58.58 | $4,601.40 | 73.0 | 221.0 | $4.27 | $942.94 |
| 2027 | $60.45 | $4,942.94 | 71.0 | 292.0 | $4.48 | $1,308.16 |
| 2028 | $62.39 | $5,308.16 | 69.0 | 361.0 | $4.70 | $1,698.15 |
| 2029 | $64.38 | $5,698.15 | 67.0 | 428.0 | $4.94 | $2,113.98 |
| 2030 | $66.44 | $6,113.98 | 65.0 | 493.0 | $5.19 | $2,556.78 |
| 2031 | $68.57 | $6,556.78 | 63.0 | 556.0 | $5.45 | $3,027.69 |
| 2032 | $70.76 | $7,027.69 | 61.0 | 617.0 | $5.72 | $3,527.85 |
| 2033 | $73.03 | $7,527.85 | 59.0 | 676.0 | $6.00 | $4,058.46 |
| 2034 | $75.36 | $8,058.46 | 58.0 | 734.0 | $6.30 | $4,627.01 |
Investing a lump sum now can add significant value to your portfolio:
- You can buy 734 shares for a $4,500 discount.
- You can double your annual dividend during the same period.
- You can benefit from capital appreciation.
