Can you earn a stable passive income for your retirement from stocks? The TSX has some attractive dividend offers that could convert a $20,000 investment today into a $3,346 annual passive income in the long term. Every investment has some risk, and the possible risk in dividend investing is the company announcing dividend cuts or you getting stuck with a low yield and non-inflation-adjusting passive income.
How to make $3,346 annually while doing nothing
The TSX has some good Dividend Aristocrats that have a record of paying regular dividends for decades. Some Aristocrats even grow their dividends by 3% or more and have never cut dividends.
If you invest $20,000 now, you can lock in a 7% dividend yield for as long as the company pays dividends without any cuts. The table below shows how your $20,000 will compound over 15 years and generate $3,346 in annual passive income.
| Year | 7% Dividend Yield | Total Amount |
| 2024 | $20,000.0 | |
| 2025 | $1,400.0 | $21,400.0 |
| 2026 | $1,498.0 | $22,898.0 |
| 2027 | $1,602.9 | $24,500.9 |
| 2028 | $1,715.1 | $26,215.9 |
| 2029 | $1,835.1 | $28,051.0 |
| 2030 | $1,963.6 | $30,014.6 |
| 2031 | $2,101.0 | $32,115.6 |
| 2032 | $2,248.1 | $34,363.7 |
| 2033 | $2,405.5 | $36,769.2 |
| 2034 | $2,573.8 | $39,343.0 |
| 2035 | $2,754.0 | $42,097.0 |
| 2036 | $2,946.8 | $44,851.1 |
| 2037 | $3,139.6 | $47,797.8 |
| 2038 | $3,345.8 | $50,937.4 |
Assuming your $20,000 investment earns a 7% annual yield of $1,400, you can compound this return by reinvesting the payout in another 7% yield stock. The objective is to look for a safe 7% yield.
The risk is that you may lock in a lower yield in some years when the market is at its peak. However, this risk will be offset if you continue investing your dividends even in a downtrend. You could probably lock in an 8-9% yield in the downturn that could offset a 5-6% yield during the upturn.
Invest $20,000 in these three stocks
You can lock in greater than 7% yield by investing $20,000 in the below three stocks:
Pipeline stocks
The first two are pipeline stocks and have a similar industry risk. However, their operations and business risks are different. TC Energy is spinning off its business into liquid and gas pipelines. On one side, it is divesting its non-core assets to reduce its debt to 4.75 times its earnings before interest, taxes, depreciation, and amortization (EBITDA). On the other side, it is building new pipelines and is on track to place about $7 billion of assets into service in 2024.
The company said that it will continue to grow its dividends by 3-5% after the spinoff. This growth rate is slower than its 20-year compounded annual growth rate (CAGR) of 7%, but it will help your passive income grow with inflation.
Enbridge stock has a stable balance sheet and is acquiring a gas utilities business to add to its stable cash flow. Along with the acquisition, Enbridge is also building new pipelines. The addition of new pipelines and an increase in the toll rate helped it grow its dividends steadily for 29 years in a row. The two stocks can help you achieve a relatively stable passive income for retirement.
BCE stock
The telecom stock has slipped 27% in a year and is trading near its 10-year low. The dip is partially because of high interest rates that have made its debt expensive and are eating on its cash flows. BCE paid out 113% of its free cash flow (FCF) in dividends in 2023 and still grew its dividends per share by 3% in 2024 despite expecting a dip in FCF. This has raised concerns about BCE pausing its dividend growth.
The interest rate headwind will subside as BCE will use rate cuts to restructure debt. Until then, it has increased its liquidity to thrive. The major concern is a regulatory decision to give smaller competitors access to BCE’s expensive infrastructure at a discounted rate. If this becomes a law, it could force BCE to cut dividends for a few years until it establishes its new revenue sources of digital ads and cloud. There is a risk but also a reward of locking in an 8.6% dividend yield and a 40% capital appreciation in a recovery rally if the regulator reverses its decision.
