When it comes to creating passive income, there’s something that a lot of Canadian investors forget to do. Not only should you be looking at what you can earn in dividend income, but also what you could earn through returns. Both of these methods are passive income, and together can create incredible passive income. And it’s why we’re going to focus on what you could create in 2024.
First, which sector?
The key to creating a lot of passive income goes far beyond just picking a stock with a high dividend yield. Analysts will provide insight into sectors, industries, and other areas of the market that are due for a significant rise in the year ahead. One of these areas includes the aerospace industry.
Analysts have identified aerospace stocks as having a show of strength in 2023 that should continue in 2024, with growth remaining high in the sector. Air travel recovery continues, specifically for business jet airlines. Global revenue passenger kilometres have been climbing higher and higher, but still remain below 2019 levels.
Therefore, while there was an increase in 2024, 2024 should be when we see not just a recovery to 2019 levels, but indeed aerospace stocks climb beyond those levels. And with interest rates and inflation hopefully going lower, we should also see higher aircraft production as well.
A stock to consider
When looking for a stock in the aerospace sector then, analyst highly recommend Exchange Income (TSX:EIF). This dog has been identified as an old performer, with its consensus price target currently averaging at about $63.50. Analyst believe that growth will continue through 2020 into 2025, especially as it continues to see new contract wins. This includes recent wins in British Columbia and Manitoba for medevac contracts.
It also includes new surveillance activity, a new contract for airlines that support Air Canada, and expected organic growth in its windows business. This last driver should last for the next two years, as growing demand for new housing also increases the need for windows.
All in all, analysts have been showing confidence in the stock and its ability to grow its earnings before interest, taxes, depreciation and amortization (EBITDA) for the future. Furthermore, Exchange Income should have no problem reaching its forecasted $600 to $635 million for full-year 2023.
Putting it all together
Exchange income stock currently provides investors with a 5.6% dividend yield. As mentioned, it also has a consensus price target of about $63. At the time of writing this article, shares go for about $46. That would provide investors with a potential upside of 37% at these rates.
Now let’s say you were to put $5,000 into Exchange Income stock and see it rise to those highs. Here is what could happen within the next year!
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | PORTFOLIO TOTAL |
| EIF – now | $46 | 109 | $2.64 | $287.76 | monthly | $5,000 |
| EIF – highs | $63 | 109 | $2.64 | $287.76 | monthly | $6,867 |
As you can see, this would create returns of $1,867, plus dividends at $287.76. That’s a total of $2,154.76 in passive income for 2024 alone! Income that you can take out each and every month.
