Passive Income: How Much Should You Invest to Earn $1000/Year

Dependable income stocks like Enbridge can help you earn worry-free passive income regardless of market and commodity cycles.

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Dividend stocks of fundamentally strong companies are among the top bets for generating steady passive income. Thankfully, the Canadian stock market has several such dividend-paying stocks with a growing earnings base and resilient distribution history, making them attractive investments for starting a passive income stream. 

Amongst the reliable passive income stocks, Enbridge (TSX:ENB), Fortis (TSX:FTS), and Canadian Utilities (TSX:CU) are my top picks. These Canadian stocks have paid and increased their dividends for decades. 

Against this background, let’s understand how much you should invest to earn $1,000/year in passive income from these stocks. But before that, let’s look at the factors that make Enbridge, Fortis, and Canadian Utilities worry-free passive income stocks.  

Enbridge 

Enbridge operates an energy infrastructure business and transports oil and gas. It also owns a growing portfolio of renewable energy assets. This energy company is famous for paying and increasing its dividend regardless of commodity cycles. Its diversified business model generates solid distributable cash flows (DCF) and supports dividend payments. 

It’s worth noting that Enbridge has paid quarterly dividends for about 69 years. Moreover, it raised the dividend for 29 consecutive years at a compound annual growth rate (CAGR) of 10%. Besides well-protected payouts, Enbridge offers a high yield of 7.63%. 

Enbridge’s multi-billion secured projects, long-term contracts, power-purchase agreements, and high asset utilization position it well to organically generate stellar DCF/share. Further, its strategic acquisitions will likely drive its earnings and cash flows. This indicates that Enbridge is well-positioned to generate higher DCF in the future, which will drive its payouts. 

Fortis 

Fortis operates an electric utility business and generates stable earnings and cash flows. Thanks to its defensive business model and predictable cash flow, the company has consistently increased its dividend for five decades. Its low-risk business, stellar track record of dividend payments, and visibility over future payouts make Fortis a worry-free stock to generate passive income. 

Fortis is growing its rate base through secured projects, which will drive its future earnings and dividend payments. For instance, the utility company plans to grow its rate base by about 6.3% annually through 2028. This will enable Fortis to expand its earnings and increase its dividend by 4 to 6% annually during the same period. 

Fortis pays a dependable dividend and offers a reliable dividend yield of about 4.5%. 

Canadian Utilities 

Canadian Utilities boasts the longest history of uninterrupted dividend growth among all publicly traded Canadian companies. This solid dividend payout history makes Canadian Utilities a top choice for investors seeking reliable passive income. For instance, this utility company has increased its dividends for an impressive 51 consecutive years. It also offers an attractive yield of over 5.9% based on the closing price of $30.20 on April 19.

The company’s remarkable dividend-growth history stems from its ability to generate solid earnings and predictable cash flows backed by its regulated and contracted assets. Further, the firm’s ongoing investments in regulated utility assets are likely to expand its rate base and, in turn, earnings. Additionally, its focus on commercially secured capital growth projects will likely support its growth, enabling Canadian Utilities to distribute higher dividends.

Make $1,000 per year

Enbridge, Fortis, and Canadian Utilities are reliable Canadian stocks that can help you earn a steady passive income. The table shows that an investment of $5,600 in each stock can help you earn over $251.90 every quarter, or about $1,000/year. 

CompanyRecent PriceNumber of SharesDividend Total PayoutFrequency
Enbridge$47.97116$0.915$190.32Quarterly
Fortis$52.89105$0.59$111.51Quarterly
Canadian Utilities$30.20185$0.453$83.81Quarterly
Price as of 04/19/2024

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 Sneha Nahata has no position in any of the stocks mentioned. The Motley Fool recommends Enbridge and Fortis. The Motley Fool has a disclosure policy.

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