It’s amazing to me how many Canadians don’t realize just how easy it is to create passive income each month — passive income they can set up and forget about and never touch again! And that cash is sorely needed right now, with the market still performing as it has.
That’s why today we’re going to look at how Canadian investors can start creating monthly income right now and a dividend stock to get you there.
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Getting started
The key here is two steps. First, you’re going to want to have a Tax-Free Savings Account (TFSA). There are two main reasons to have the TFSA as opposed to other investment accounts. The TFSA cannot be taxed, as it states. This means any income that you receive, including dividend income, isn’t taxed by the government.
Furthermore, you can withdraw as much or as little as you want at any time. Should you need your monthly passive income to pay bills, buy a car, or just get some groceries, it will be right there waiting for you.
The next step is to make automated contributions. This is key. By setting up contributions and just forgetting about them, then creating automatic investments to boot, you can create a strong and growing portfolio without lifting a finger!
Why now?
I get it. Right now is a very tricky time to get into investing. And I definitely don’t think you should start sinking all your cash into some risky stocks. First, meet with your financial advisor, align your goals with your income, and consider Guaranteed Investment Certificates (GIC) and other fixed-income assets.
From there, you can still have cash left over to make these automated contributions. And honestly, right now is a great time to get into value stocks. What makes them valuable? These would be considered blue-chip companies that are down but have cash provisions to allow them to bounce back. And here is one I would consider right now.
A top monthly passive-income provider
If you’re looking for top passive income that lasts, consider Canadian Apartment Properties REIT (TSX: CAR.UN). CAPREIT stock is a solid choice as investment in apartment properties continues to grow. However, it also has a strong history of growth over the last few decades.
The thing is, CAPREIT stock is quite valuable right now — especially as a monthly passive-income stock. It offers a 3.52% dividend yield as of writing, coming out as $1.45 per share annually. It also trades at a valuable 0.71 times book value, and shares are down just 3.5% in the last year, providing an easy boost.
What’s more, the company’s dividend yield is far higher than the five-year average of 2.79%! So, you’re getting a higher dividend, a discount on the stock, and superb passive income. And if you’re worried about a cut, don’t be. The company also boasts a debt-to-equity (D/E) ratio of just 73.4%. Therefore, there is more than enough cash on hand to pay down debts.
Bottom line
Now, let’s say you invested in CAPREIT stock for the next year, putting aside $500 per month. Here is what you would have from that $6,000 investment into your TFSA by the end of the year if shares hit 52-week highs.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | PORTFOLIO TOTAL |
| CAR.UN – now | $41 | 146 | $1.45 | $211.70 | monthly | $6,000 |
| CAR.UN – highs | $53 | 146 | $1.45 | $211.70 | monthly | $7,738 |
After reaching those highs, you would have made $1,738 in returns and $211.70 in annual income! That’s total passive income of $1,949.70, coming to about $162.47 per month! And that’s all without lifting more than a finger.
