If you’re like me, you certainly weren’t thrilled when interest rates rose. However, the blow may have been a bit lessened after finding out, like myself, that guaranteed investment certificates (GIC) also offered a superbly high rate.
Now, again if you’re like me, you might be considering using your GIC money as it reaches expiration for investments. The market may be taking a turn this year for the better, and I don’t want all my cash locked away when that happens.
And one company I continue to watch for passive income in 2024 is Constellation Software (TSX:CSU). So let’s look at why you may want to watch it as well.
TFSA focus
If you’re looking at CSU stock for your Tax-Free Savings Account (TFSA) with a focus on passive income, there are many points to consider. For CSU, the company has consistently increased its revenue and earnings year-over-year. This has demonstrated the company’s ability to grow organically, even as an acquisition powerhouse.
The software acquisition company continues to hold an impressive compound annual growth rate (CAGR) of 30% in the past 10 years! That doesn’t look to be slowing, as the stock offers high profit margins and continues to efficiently generate profits.
What’s more, the company has a long success story in the tech sector. CSU uses a strategy of acquiring smaller, niche vertical software companies. These allow it to optimize operations and drive growth, expanding their reach in various industries and among specialized software solutions.
Long-term grower
What’s more, CSU stock is perfect if you want a long-term option. Sure, you could continue to see 30% growth in the next year. But it could be even higher than that down the line. Again, the focus on profitability from high-growth tech companies creates immediate profits for the stock. Over the last decade, it has created exceptional returns for shareholders from this method.
The only downside? You really are focusing on returns with CSU stock. The company has a strong track record of growth, but a lower dividend yield at 0.14%. What’s more, dividend growth remains unpredictable, as the company focuses more on returns.
Therefore, if your primary goal is passive income from dividends, CSU stock is not your best option. If you want a piece of a growing tech stock with a solid history of growth, though, then CSU stock could be for you.
What you could get
So let’s say you put that $15,000 into CSU stock. You then see it grow another 30% in the next year. Realize, however, that in the last year shares have exploded upwards by 64%. So it could be even more.
Meanwhile, you’ll be collecting that 0.14% dividend yield. Overall, this is what you could achieve.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | PORTFOLIO TOTAL |
| CSU – now | $3,783 | 4 | $5.38 | $21.52 | quarterly | $15,000 |
| CSU – highs | $4,918 | 4 | $5.38 | $21.52 | quarterly | $19,672 |
As you can see, your dividends will be minuscule at $21.52. However, you could achieve $4,672 in returns! That would bring your passive income to $4,693.52! And that is anything but small.
