Passive Income: How Much to Invest to Earn $1,000 Each Year

If you want the right passive-income producer, you want historical performance and future growth, and this dividend stock provides exactly that.

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When it comes to creating passive income, earning $1,000 every year can be a challenge — especially if you’ve decided you need to take out dividend income rather than reinvest it. While that’s the ideal, if this is what you need to live your life, then that is totally up to you.

In fact, that certainly can be the case in retirement. You need that money to quite literally live your life! Yet that does not mean that investors should ignore returns. Today, let’s look at what to consider if you want long-term income that should reach $1,000 each and every year.

Consider the sector

First off, investors should consider long-term, safe sectors that should continue climbing steadily over the years. There are certainly a few of these sectors to consider, but one that I like is insurance and asset management.

In this case, people will always have a need for financial protection, which translates to consistent demand for insurance products like life, health, and auto insurance. This steady demand creates a predictable stream of income for insurance companies.

As for asset management, as wealth increases, so does the demand for professional investment management. Individuals and institutions entrust their assets to asset managers for growth and income generation. This trend is expected to continue in the long run.

Consider the stock

Now, you’ll want to look for a stock that fits into this sector. In this case, for those seeking passive income I would look to Manulife Financial (TSX:MFC). Manulife stock offer various insurance products like life, health, and auto insurance, similar to what makes the sector attractive. Therefore, consistent demand for these products translates to predictable income for Manulife stock.

Furthermore, Manulife also manages wealth and investments for individuals and institutions. This aligns with the growing demand for professional investment management, which can benefit from long-term growth.

Manulife stock also has a history of producing passive income. The company has a long track record of paying dividends and growing them as well. Furthermore, the company could benefit from long-term economic growth, potentially increasing its earnings and stock price — especially with aging populations who need insurance and wealth management.

Consider its history

Now, let’s consider Manulife stock’s history for passive income. In the last decade, Manulife stock has risen steadily. Shares have more than doubled in that time, providing a compound annual growth rate (CAGR) of 7.8%.

As for the dividend, it too has risen steadily. In fact, even more so! The company’s CAGR for its dividend has risen at an 11.9% rate over the last decade as well. This can provide even more passive income. Now, let’s see how much you would need to invest to create $1,000 each year in dividends alone.

COMPANYRECENT PRICENUMBER OF SHARESDIVIDENDTOTAL PAYOUTFREQUENCYPORTFOLIO TOTAL
MFC – now$36625$1.60$1,000quarterly$22,500
MFC – 7.8%$38.80625$1.79$1,118.75quarterly$24,255

As you can see, to create $1,000 in passive income through dividends, that would mean investing $22,500. However, see that rise, and the next year, you’ll have even more passive income. That should reach $1,118.75 in dividends, as well as returns of $1,755! That’s total passive income of $2,873.75 if history repeats itself. And given the company’s performance, history likely will.

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 has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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