Investors: Here’s How to Make $1,000 Each Month in Retirement

With monthly pay dividend stocks like First National Financial (TSX:FN), you can get regular cash income paid to your RRSP or TFSA.

| More on:

Do you want to earn $1,000 per month in passive income in retirement?

It’s an ambitious goal, but it can be achieved.

With high yield dividend stocks, you can get $12,000 per year with a surprisingly small amount of money invested upfront. It may take you some time to save the required amount of money, particularly if you live on a meagre income. Still, it can be done. Consider that $12,000 annually translates to $1,000 per month, and with some stocks, the dividend is in fact paid monthly. In this article, I will explore how you can get to $1,000 per month in dividend income with monthly paying dividend stocks.

$200,000

Say, $200,000 is how much you have to invest in monthly pay dividend stocks yielding 6% to get $1,000 per month in dividend income. At 6%, a $200,000 investment pays out $12,000 per year. That works out to $1,000 per month. With quarterly pay dividend stocks, you get $3,000 per payment. With monthly pay dividend stocks, you get $1,000 each and every month. In the extreme long run, it doesn’t really matter whether your dividends are paid quarterly or monthly. There are some who even argue that it doesn’t matter whether a stock pays a dividend at all, as dividend payments reduce stock prices by the amount paid! Nevertheless, dividends are great for turning investments into cash without the hassle of manually buying and selling. And you only need to invest a few hundred thousand dollars to get to $1,000 per month in dividend income.

A stock that could make this really happen

If you want to earn $1,000 per month in dividend income with relatively little invested, you need to find an investment that has two characteristics:

  1. A high yield (let’s say 6%).
  2. A monthly payment schedule.

Stocks fitting this description can be hard to find. High yield stocks are out there, but if you’re looking for high yield and monthly payments, you’re narrowing down your list of eligible investments quite a bit.

Nevertheless, it is possible to find what you’re looking for. If you screen stocks for high yield, you can narrow your search down to a manageable level, and then find high yield stocks with monthly payment schedules.

First National Financial (TSX:FN) is one stock that fits the bill. First National is a non-bank lender. Its shares have an approximately 6% dividend yield. The dividends are paid out monthly. With $200,000 invested into FN stock, you should get about $1,000 per month in dividends – assuming the dividend does not change.

How is First National able to pay such a generous dividend? In truth, the dividend isn’t that generous in itself. FN’s stock price is just low. The stock reached a peak of $52.37 in 2021; it has fallen 25.5% since then. When a stock price falls precipitously, the stock often acquires a high dividend yield, even if the company’s payout ratio is not that high.

Is the dividend safe?

Is the dividend from First National financial safe?

I would argue that yes, it is.

A lot of people are worried about mortgage lenders right now because housing is expensive and interest rates are rising. These are valid concerns, but First National has an advantage. Since it isn’t a bank, it doesn’t take deposits. The financial services company simply finances its own loans by issuing bonds. This lets FN match the term to maturity of its financing to the term to maturity of its investments, minimizing liquidity issues.

First National seems to be having success with this approach. In its most recent quarter, it delivered:

  • $141 billion in mortgages under administration, up 10%.
  • $563 million in revenue, up 43%.
  • $95.5 million in operating income, up 98%.
  • $83.6 million in net income, up 109%.

Overall, it was an impressive showing. With a mere 46% payout ratio, FN is not paying out too high a percentage of its profits as dividends. So, the stock’s dividend is probably fairly safe.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Andrew Button has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

How to Use Your TFSA to Average $382.50 Per Month in Tax-Free Passive Income

This TFSA strategy can reduce risk while raising the average yield.

Read more »

Man holds Canadian dollars in differing amounts
Dividend Stocks

Invest $22,000 in This Dividend Stock for $108.50 in Monthly Passive Income

This dividend stock is a top option for investors looking for not just long-term passive income but regular income every…

Read more »

stock research, analyze data
Dividend Stocks

Generate $500 in Tax-Free Monthly Income With This Easy Strategy

Passive-income investing is easy thanks to this fund's steady $0.10-per-share monthly payout.

Read more »

how to save money
Dividend Stocks

Got $2,000? 5 Telecom Stocks to Buy and Hold Forever

The discount and recovery potential are reasons enough to consider telecom stocks in Canada right now. The fact you can…

Read more »

Dividend Stocks

The Underperformers: Canadian Stocks That Missed the Mark in 2024

I'm bullish on one of these dividend stocks but bearish on the other.

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

2 TSX Stocks to Invest $20,000 and Create $2,597.60 in Passive Income

Need income? We got you, with these two top dividend stocks due for more solid growth and passive income.

Read more »

money cash dividends
Dividend Stocks

Trump Tariffs: 1 TSX Stock That Could Take a Huge Hit

This TSX stock hopes to improve shareholder returns in 2025 but could take a huge hit instead from Trump’s tariffs.

Read more »

A lake in the shape of a solar, wind and energy storage system in the middle of a lush forest as a metaphor for the concept of clean and organic renewable energy.
Dividend Stocks

Best Stock to Buy Right Now: Brookfield Renewable vs TransAlta Corporation?

Brookfield Renewable Partners (TSX:BEP.UN) is a massive player in renewables.

Read more »