All investments carry an inherent risk. And when you talk about stocks, the risk is higher, even for safe stocks. After all, businesses that offer stocks are exposed to macroeconomic, regulatory, and company and industry risks. However, you can mitigate this risk and bulletproof your passive-income portfolio in three ways:
- Diversify your investments across sectors.
- Have exposure to contrarian stocks that move in opposite directions than the rest.
- Buy fundamentally strong stocks near their low.
When you buy a stock at a cheaper price, the risk of a further downside reduces and the potential of an upside increases. Keeping all these things in mind, here are two stocks you could consider investing $10,000 right now.
Two dividend stocks for a bulletproof passive-income portfolio
The unit price of CT REIT (TSX:CRT.UN) and Timbercreek Financial (TSX:TF) move in the same direction, but how they earn money has a contrarian impact on their distributions.
CT REIT
CT REIT buys and manages stores of its parent, Canadian Tire, from which it earns more than 90% of its rent. Moreover, it has the first choice to acquire, develop, or intensify any Canadian Tire store. It also acquires any Canadian Tire stores owned by a third party. Since it doesn’t have to worry about finding and retaining tenants, it has an assured cash flow. With every new store added or intensified, its cash flow increases. It even increases its rent annually by 1.5%, ensuring stable growth.
Because of the above catalysts, CT REIT is among the few REITs growing its distributions for the last 10 years by an average of 3%. Moreover, it has sustained its dividend-reinvestment plan (DRIP) at a time when many REITs suspended it.
This model is robust but has one risk: too much dependence on Canadian Tire. If something happens to the parent company, the REIT could face the after-effects. It is also prone to high interest rates as it issues new debentures to pay off maturing debentures.
Timbercreek Financial stock
Timbercreek Financial benefits from higher interest rates since it lends short-term mortgages to commercial REITs. The lender enjoyed a full year of high interest income in 2023 and shared a portion of its profits with its shareholders through a special dividend in March.
How to invest $10,000 today for a $121 monthly passive income
| Number of TF Shares @ $9.5 | Total TF Shares | Annual Payout at $0.690 Per Share | Year | Number of CT REIT Shares @ $16.5 | Total CT REIT units | CT REIT Dividend per share (3% CAGR) | Annual Payout |
| 651.00 | 651 | $449.190 | 2024 | 352.00 | $0.898 | $316.166 | |
| 27.22 | 678.22 | $467.974 | 2025 | 19.16 | 371.16 | $0.925 | $343.379 |
| 28.36 | 706.59 | $487.544 | 2026 | 20.81 | 391.97 | $0.953 | $373.511 |
| 29.55 | 736.13 | $507.932 | 2027 | 22.64 | 414.61 | $0.981 | $406.934 |
| 30.78 | 766.92 | $529.173 | 2028 | 24.66 | 439.27 | $1.011 | $444.074 |
| 32.07 | 798.99 | $551.302 | 2029 | 26.91 | 466.19 | $1.041 | $485.421 |
| 33.41 | 832.40 | $574.357 | 2030 | 29.42 | 495.61 | $1.072 | $531.535 |
| 34.81 | 867.21 | $598.375 | 2031 | 32.21 | 527.82 | $1.105 | $583.068 |
| 36.27 | 903.48 | $623.398 | 2032 | 35.34 | 563.16 | $1.138 | $640.767 |
| 37.78 | 941.26 | $649.468 | 2033 | 38.83 | 601.99 | $1.172 | $705.502 |
| 39.36 | 980.62 | $676.627 | 2034 | 42.76 | 644.75 | $1.207 | $778.280 |
TF is trading below $8, which means you can buy 651 shares for $5,000. The monthly payout from these shares will buy more DRIP shares of TF. (You can get less than one DRIP share.) I took a conservative estimate where the DRIP buys TF shares at its normal trading price of $9.5. The $5,000 investment can give you an annual payout of $676.6 by 2034, assuming TF maintains its dividends at $0.3690 per share.
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If you invest $5,000 in CT REIT now, you can buy 352 units for $14.16/unit. The DRIP can buy more units from the monthly payout. Moreover, if CT REIT continues growing its distributions by 3% annually, the incremental payout can buy more units, assuming the cost per share is $16.5. At the end of 2034, you could probably get $778 in annual passive income. The combined monthly passive income of the two stocks would be $121 [($778+$676.6)/12].
However, if you do not opt for DRIP and collect the payout, you can get $63 from April onwards.
