Need Another Paycheque? Invest $40K for $395.05 in Monthly Passive Income

If you’re looking to consolidate your investments and bring in more passive income, then consider this ETF that provides it in spades.

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Inflation numbers came out this week for Canadians, and there was some pretty great news! Inflation came in far lower than expected, with an annual rate of inflation falling to 2.9% in January. This is far lower than the 3.3% expected by economists, edging us closer to the 2% target.

It also marked the first monthly decline since spring of 2020, with consumer prices dropping 0.1% compared to December. This could mean we’re on the path to seeing interest rates perhaps come down by June.

But it may not help you now

The thing is, the reason that consumer prices are coming down is because there isn’t the demand that we’ve seen in the past. This comes from sluggishness in spending, and it’s clear why. Canadians need to keep cash on hand and cut back wherever they can. But what if you’ve already done this and are still scraping by?

It might be time to consolidate your investments in this case. Look at those growth stocks that you’ve made earnings on, and consider putting them elsewhere. What I would recommend is finding a strong dividend provider and, ideally, an exchange-traded fund (ETF).

It doesn’t have to be forever, but if you can find a strong dividend ETF that produces monthly income, this can be a saviour. In fact, you could make passive income each month that could act like another paycheque!

One to consider

One strong option that I would consider these days is iShares Canadian Financial Monthly Income ETF (TSX:FIE). FIE ETF is a monthly provider of passive income, which focuses on some of the best Dividend Aristocrats in the game. This means the companies have increased their dividend each year for at least the last five years.

What’s more, these companies tend to offer dividend payments only every quarter. So, now you’re getting access to strong companies, but with monthly payouts! And this has proven lucrative in terms of returns as well.

FIE ETF currently trades at just 8.27 times earnings, with shares up 5% in the last year and 2.5% year to date. Investors can grab hold of a dividend yield at 6.89% as of writing, which comes to $0.48 per share annually. And with shares at just $7, that can add up quickly. So, how much would you need to invest to create another paycheque?

What to invest

So, again, remember, you’re investing in an ETF here. And by investing in this ETF, you’re really getting a portfolio of some of the best stocks in Canada. So, making a larger investment shouldn’t scare you all that much, especially when you get so much in dividends.

If you’re able to sell off some of those growth stocks you brought in, you could consolidate your stocks into this ETF. So, that could mean putting a $40,000 investment in your TFSA, while keeping the rest in things like bonds and Guaranteed Investment Certificates (GIC).

Here is what that could look like if you invested $40,000 and if shares rise another 5%, bringing in passive income.

COMPANYRECENT PRICENUMBER OF SHARESDIVIDENDTOTAL PAYOUTFREQUENCYPORTFOLIO TOTAL
FIE – now$75,714$0.48$2,742.72monthly$40,000
FIE – future$7.355,714$0.48$2,742.72monthly$41,997.90

You could have returns of $1,997.90 and dividends of $2,742.72! That’s total passive income of $4,740.62 annually and $395.05 each month. And these are very conservative numbers. Invest long term, and you could create an even higher passive-income stream for yet another paycheque.

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 Amy Legate-Wolfe 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.

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