How to Build a Bulletproof Monthly Passive-Income Portfolio With Just $10,000 and TD Stock

TD (TSX:TD) stock has been a poor performer over the last few years, but could be a big passive-income winner as the market recovers.

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Investing in dividend stocks that offer stable payouts can certainly be of benefit to those seeking a passive-income stream at a low cost. And some of the most stable dividend stocks out there are Canadian banks.

Other dividend stocks have the risk associated with them that there could be a cut at any time. Granted, that could happen with bank stocks. But it’s unlikely, especially given that these banks haven’t been through a financial crisis since 1837.

That’s quite unlike the several banks in the United States that were forced to stop dividend payments back during the Great Recession. It’s also unlike many of the oil and gas companies that were forced to cut back or at least freeze their dividend payments during the pandemic. And some have yet to increase them once more.

So, if you’re looking to invest in dividend stocks, you’re going to want to invest in companies with strong fundamentals and solid payout ratios. These companies should, therefore, have the ability to grow in the future, with enough room to reinvest in growth projects, lower their debt levels, and make strong acquisitions. All this should help to raise dividends even further.

Investing in TD stock

So, of all the Canadian banks, why should investors consider Toronto-Dominion Bank (TSX:TD)? For one, the dividend stock offers a high yield at 5.02% as of writing. This comes to an annual ratio of $4.08 per share.

And while its American counterparts may struggle, TD stock has proven time and again that it can not only hold a high dividend, it can raise it. TD stock may be down from all-time highs, but it remains a strong company that can bounce back.

TD stock continues to hold a solid position as a market share leader. It’s number two in terms of market capitalization, with diverse sources of income. Rather than solely relying on traditional banking, the company includes wealth management, insurance, and credit card services. The company has also maintained a strong capital base and profitability. This has allowed it to weather the current economic storm and, indeed, invest in future growth.

American exposure

Part of that growth comes from its investments in the United States. The company is one of the top 10 banks in the United States. This has proven beneficial, given that the Canadian economy has been quite weak compared to the U.S.

What’s more, it continues to hold a lot of cash on hand after its First Horizons purchase fell through. This has put them in a strong position financially, allowing for the continued growth of its dividend.

So, how much could you bring in? Let’s say TD stock returns to all-time highs in the next year. Here is what $10,000 could bring in through returns and dividends.

COMPANYRECENT PRICENUMBER OF SHARESDIVIDENDTOTAL PAYOUTFREQUENCYPORTFOLIO TOTAL
TD – now$81.50123$4.08$501.84quarterly$10,000
TD – highs$108123$4.08$501.84quarterly$13,284

With returns of $3,284 and dividends of $501.84, you could create a passive income of $3,785.84. That would come to $315.50 as of writing! And as dividends and returns continue to climb, that could create immense passive income for your future.

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 positions in Toronto-Dominion Bank. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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