Canadians looking to invest often get into investing simply because they want to make some extra cash. Yet, when it comes to creating passive income, this can lead many investors to only consider dividend stocks, which can be a problem in multiple ways.
When considering passive income, investors need to look at both returns and dividends when looking at dividend stocks. What’s more, they should be investing a variety of areas to create a diversified portfolio that’s filled with a number of companies providing passive income through returns and potentially dividends as well.
With this in mind, it can be quite simple to create $2,000 per month in passive income. It’s going to take a reasonably high investment, but that doesn’t mean it has to be risky. So, let’s look at one investment that could bring in this amount each and every month.
Consider CYH ETF
If we want passive income that’s diversified, provides monthly income, and will stand the test of time, I would consider iShares Global Monthly Dividend Index ETF (CAD-Hedged) Common Class (TSX: CYH). This exchange-traded fund (ETF) uses a strategy to provide investors both with a steady monthly income stream, while also providing strong returns for those wanting overall high passive income.
CYH has a strategy to providing investors with exposure to a diversified range of global equities, paying out dividends on a monthly basis. Overall, it seeks to replicate the performance of the Dow Jones EPAC Select Dividend Index. This provides investors with one click for global exposure through developed markets outside of North America.
The ETF focuses on dividend exposure, so income-oriented investors wanting regular income are definitely a target audience. CYH managers seek out companies with a history of paying dividends while still providing that diversification through global equities.
What’s more, the ETF is hedged against inflation, hence the Canadian Hedged part of its name. This allows the ETF to minimize the impact of foreign exchange fluctuations. This will provide a clearer picture of how your growth has done over time.
Performance and that $2,000
So, to see what investors could bring in through this investment, we’ll need to look at what the ETF offers. In the case of CYH ETF, the company has seen shares increase by 5% in the last year. It currently offers a 4.76% dividend yield as well. Overall, returns have been relatively stable. Yet, since 2009, shares are up 122%! This has provided a compound annual growth rate (CAGR) of 5.5%.
Taking this into consideration, should we see 5% growth in the next year, here is what you would need to invest to create $2,000 in monthly income from your returns and dividend income.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | PORTFOLIO TOTAL |
| CYH – now | $20 | 12,314 | $0.948 | $11,673.67 | monthly | $246,280 |
| CYH – 5% increase | $21 | 12,314 | $0.948 | $11,673.67 | monthly | $258,594 |
As you can see, this is a huge investment. But it very well could bring in $24,000 in passive income for the year. Yet, this is also a strong investment for long-term, passive-income seekers. But if you take on this strategy, in returns you would bring in $12,314 with dividends of $11,673.67. That would be a total of $23,987.67, just shy of $24,000 a year and $1,998.97 each month!
