Invest $500 Each Month to Create $1,851.60 in Passive Income in 2024

This dividend stock is one of the best options out there for those seeking long-term passive income, as well as huge growth in 2024!

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Canadians looking to create passive income in 2024 likely already know that investing is the easiest and arguably the most successful way to create passive income. Not just this year, but long term as well.

Investors will be gaining passive income not only from dividend income, but also from returns. With that in mind, let’s look at what investors should consider, a dividend stock to buy, and how much you could create in passive income in 2024.

What to consider

When investors are looking for a strong dividend stock for long-term passive income, there are multiple factors to consider. First of course is the dividend yield. Look for stocks with a relatively high dividend yield, but not too high. This can actually mean that the dividend is unstable and there could be underlying issues. Then, look at the company’s track record for paying dividends. A history of increasing dividends annually and even during trying times can mean the companies are financially strong.

From there, look at the company’s payout ratio. A lower ratio means the company could have room to increase its dividends, even during a downturn. Furthermore, consider the company’s financial health. Look at its balance sheet, cash flow, and debt levels. You’re looking for stability and growth, again even during trying times.

From there, look to the future. How is the industry going to grow in the future? Dividends can provide passive income, but the company should show growth potential as well. So seek out companies with a competitive advantage, strong market position, and the potential for earnings growth. Furthermore, companies that are diversified offer growth in various sectors to reduce overall risk.

A dividend stock to consider

When looking at passive income stocks that could tick all the boxes, financial institutions and specifically Canadian banks can be some of the best places to look. But for one dividend stock offering a deal as well as long-term passive income, I would consider Bank of Nova Scotia (TSX:BNS).

BNS, better known as Scotiabank, is one of the largest banks in Canada and a leading financial institution across North America. The company has a stable and reliable track record dating back over 185 years. It has weathered financial crises, including this one, through a diversified business model. It holds operations spanning from retail banking to wealth management, as well as international banking. This has supported a diverse range of revenue streams, leading to consistent earnings and dividends.

What’s more, the company has a strong record of financial performance, and there is more growth coming. This includes from its international operations in Latin America and the Caribbean. This growth in emerging markets could therefore be huge for long-term investors.

How much you could get

If you’re now looking to create strong passive income, let’s consider Scotiabank stock and how it adds up. The company offers a 6.27% dividend yield, with shares still down from all-time highs. If the bank reached those levels, it would mean a potential upside of 24% as of writing!

Furthermore, you can add in that dividend yield as well, which currently has a strong 69% payout ratio. Now, it’s usually recommended that you invest around 10% of your paycheque each month. If you’re making $60,000, that would mean investing $500 towards this stock each month if you can afford it. That’s $6,000 in total. So let’s see what that could bring in during 2024.

BNS – now$6790$4.24$381.60quarterly$6,000
BNS – highs$8390$4.24$381.60quarterly$7,470

You’ve now created $1,470 in returns and $381.60 in dividend income. That’s total passive income of $1,851.60 in 2024 alone!

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 recommends Bank of Nova Scotia. The Motley Fool has a disclosure policy.

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