For many investors, the goal is to become financially independent. For an individual to be financially independent, it means that they aren’t dependent on their job to cover living expenses. Although that may sound like a daunting task or maybe just a dream that can’t be achieved, it’s the reality for many people, not just in Canada but around the world.
One way you could reach financial independence is by investing in dividend stocks. These are stocks that pay shareholders a portion of their earnings on a recurring basis, simply for holding shares in the company. Your target portfolio size will depend on how much you spend per year. It’s estimated that the average living cost for a single person in Canada is $2,444 (rent included). That means, for an entire year, a single person would need to cover $29,328 of living expenses per year (rounded to $30,000 in this article).
Assuming you choose the right stocks and create a dividend portfolio that yields 5% on average, you would need to invest about $600,000.
In this article, I’ll discuss two great stocks that could help you achieve financial independence, allowing you to give up work forever.
Invest in this top dividend stock
Fortis (TSX: FTS) is the first stock that I would consider investing in to reach financial independence. When it comes to dividend stocks in Canada, this utility company is among the best. What I like about Fortis is that, because of the nature of its business, the company doesn’t experience a major slowdown during economic downturns.
Fortis is well known for its outstanding dividend-growth streak. At 50 years, Fortis’s dividend-growth streak is the second longest in the country. As of this writing, Fortis stock offers Canadians a forward dividend yield of 4.29%. To cover about $30,000 of living expenses per year, you’d need to invest around $720,000 into Fortis stock. Of course, you can bump up the yield of your portfolio with other stocks, like the one I’ll discuss next, allowing you to lower the target portfolio size that you need.
Another great dividend for your portfolio
Bank of Nova Scotia (TSX: BNS) is another great dividend stock that investors should consider buying today. This is one of the Big Five, a group of five large Canadian banks. Bank of Nova Scotia stands out from its peers due to its massive international presence. The company has a particular focus on the Pacific Alliance. That’s a region which includes the countries of Chile, Columbia, Mexico, and Peru. It’s estimated that the region could experience much faster growth than North America over the coming years.
I believe that Bank of Nova Scotia is an amazing dividend stock because of its dividend payment record. The company has been paying shareholders a dividend for 190 consecutive years. In addition to that, Bank of Nova Scotia offers investors a forward dividend yield of 7.65%. That means you would need to invest less than $400,000 to cover $30,000 in living expenses per year.
