How to Build a Bulletproof Passive-Income Portfolio With Just $20,000

Create a defensive passive-income portfolio with stocks like Fortis and Enbridge.

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Investors seeking a dependable passive-income stream can turn to stocks that pay dividends. However, to construct a resilient passive-income portfolio, emphasis should be placed on shares of companies with solid fundamentals and well-established businesses. Moreover, one should prioritize shares of companies with a growing earnings base and a proven track record of consistent dividend payments and growth.

Furthermore, as dividend payments are not guaranteed, investors should diversify their investments to generate worry-free passive income. 

With this backdrop, let’s look at three Canadian stocks that can help you create a bulletproof passive income portfolio with just $20,000. 

Fortis 

Fortis (TSX:FTS) is a top stock to create a bulletproof passive-income portfolio. The company operates a low-risk and regulated electric utility business. Utility stocks like Fortis are considered defensive because they provide essential services, leading to relatively stable revenue and earnings even during economic downturns. 

Given its defensive business, Fortis generates predictable cash flows, which enables it to enhance its shareholders’ returns through higher dividend payments. It’s worth highlighting that this dividend-paying stock has raised its dividend for an impressive 50 consecutive years and offers a decent yield of over 4% near the current levels.    

Looking ahead, Fortis will leverage its multi-billion secured capital projects to expand its rate base, supporting future earnings growth and dividend distributions. Fortis expects its rate base to grow at a CAGR (compound annual growth rate) of 6.3% through 2028, paving the way for a 4-6% yearly dividend increase over the same period. In summary, Fortis, with its low-risk business model and consistent ability to generate favourable total shareholder returns, stands out as a dependable stock.

Enbridge  

Like Fortis, Enbridge (TSX:ENB) is another solid stock for investors seeking to create a reliable passive-income portfolio. This energy infrastructure company transports and exports oil and gas. Furthermore, it manages a regulated natural gas utility business and owns an expanding portfolio of renewable energy assets.

Enbridge generates solid DCF (distributable cash flows) that allow it to enhance its shareholders’ returns via higher dividend payments. The company has increased its dividend annually for 28 consecutive years. Furthermore, its dividend sports a CAGR of 10% during the same period. Moreover, it offers a high yield of 7.6%.

The company’s diversified business model and investments in conventional and renewable assets position the company well to capitalize on the long-term energy demand. Furthermore, the power-purchase agreements, long-term contacts, multi-billion-dollar capital plan, and strategic acquisitions will drive its DCF and dividend payments. 

Bank of Montreal

Top Canadian banks are well-known for their stellar track record of dividend payments. A prime example is Bank of Montreal (TSX:BMO), which holds the record for the longest dividend payment history among Canadian corporations. Thanks to its well-diversified revenues and focus on driving efficiency, the bank consistently generates solid earnings, enabling it to boost its shareholders’ returns through increased dividend payments.

Thanks to its growing earnings, the Bank of Montreal has been paying dividends for an impressive 194 years. Furthermore, over the past 15 years, its dividend has grown at a CAGR of 5%. 

The bank’s diversified revenue streams, increasing loans and deposits, and enhanced operational efficiency are anticipated to propel its earnings and dividend disbursements. Furthermore, the bank’s sustainable payout ratio supports my bullish outlook. 

Bottom line 

These three stocks are solid investments to create a bulletproof passive-income portfolio. Further, the table below shows that an investment of $20,000 distributed equally into these three stocks can help you earn a quarterly passive income of about $289.97. 

CompanyRecent PriceNumber of SharesDividendTotal PayoutFrequency
Fortis$56.25119$0.59$70.21Quarterly
Enbridge$46.12145$0.887$128.62Quarterly
Bank of Montreal$106.9662$1.47$91.14Quarterly
Prices as of 11/09/23.

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 Sneha Nahata has no position in any of the stocks mentioned. The Motley Fool recommends Enbridge and Fortis. The Motley Fool has a disclosure policy.

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