Canadians looking to create monthly passive income are likely already considering investing. And that’s great! The issue is that this can mean looking to growth stocks that are far riskier than other investment methods.
That’s why today, we’re going to look at what could happen if you invest in a company to create passive income without worry. That’s what can happen if you combine a Tax-Free Savings Account (TFSA) with an exchange-traded fund (ETF).
The TFSA relieves the worry of being taxed by taking out the income you’ve earned over the years. Meanwhile, an exchange-traded fund (ETF) can pay you a dividend, providing returns in the process, but it also provides you with a whole slew of investments. Rather than just one investment, you’ll be getting access to everything you could possibly want!
And what you should want these days are monthly passive-income producers.
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An ETF to consider
If you want a solid monthly passive-income investment, Canadian investors should consider iShares Global Monthly Dividend Index ETF (CAD-Hedged) Common Class (TSX: CYH). This ETF seeks to provide long-term capital growth by investing primarily in global equities that pay dividends. It aims to replicate the performance of the Dow Jones EPAC Select Dividend Index.
CYH provides exposure to companies across developed markets outside of North America, including Europe, Asia-Pacific, and other regions. This geographic diversification allows investors to access dividend-paying stocks from a wide range of countries and industries.
As a dividend-focused ETF, CYH seeks to invest in companies with a history of paying consistent and sustainable dividends. These companies typically have stable cash flows, strong balance sheets, and a commitment to returning capital to shareholders through dividends.
Dividend focus
The focus here, of course, is on dividends. And that’s key for those wanting to create $300 per month in passive income. CYH aims to closely track the performance of the Dow Jones EPAC Select Dividend Index. This index selects high-dividend-paying stocks from developed markets in Europe, the Asia-Pacific region, and Canada. It employs screening criteria based on dividend yield, dividend growth, and payout ratios.
As a monthly dividend ETF, CYH distributes dividends to investors on a monthly basis. This regular income stream can be attractive for investors seeking consistent cash flow from their investments. Furthermore, CYH has a low expense ratio, allowing investors to keep as much of their investments and returns as possible. This creates the most amount of income for the lowest price.
How much you could get
So, let’s do the math. Since the COVID crash, shares of CYH have risen by 33%. This has created a compound annual growth rate (CAGR) of 7.5% in that time. If we see another rise of 7.5%, here is what you would need to invest.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | PORTFOLIO TOTAL |
| CYH – now | $19.86 | 1,510 | $0.948 | $1,431.48 | monthly | $30,000 |
| CYH – increase | $21.34 | 1,510 | $0.948 | $1,431.48 | monthly | $32,223.40 |
Altogether, you will receive returns of $2,223.40 from $30,000 in a year if shares increase by 7.5%. Plus, you’ll add $1,431.48 in dividends. That’s a total of $3,654.88 in passive income, or $304.57 every month!
