Have you ever wondered how much passive income you’ll need? Figuring out how much to invest today to get a decent return tomorrow is a question that baffles many investors.
Fortunately, it’s not as hard as it sounds, but there are two more important points to answer first than how much to invest. Those questions are where to invest and when to start investing.
Let’s try to answer them all.
Where to invest
There’s no shortage of great long-term stocks on the market right now. Some of the best stocks on the market can provide a reliable passive income today while providing ample growth tomorrow.
To meet that goal, there are three stocks for investors to consider: Fortis (TSX:FTS), Canadian Imperial Bank of Commerce (TSX:CM), and SmartCentres REIT (TSX:SRU.UN).
Each of these three stocks caters to a specific area of the market. Additionally, they can provide both growth and defensive appeal to investors.
Fortis is one of the largest utilities in North America. It generates a reliable and recurring revenue stream backed by decades-long regulated contracts. This fact alone makes it one of the most defensive offerings on the market.
Fortis is also incredibly reliable as an income stock. The company has provided an insane 50 consecutive years of dividend increases, making it an ideal buy-and-forget candidate.
CIBC is one of Canada’s big banks. It too has a wide defensive moat thanks to its sprawling domestic segment. Bank stocks like CIBC also boast long-term stable growth and a very juicy yield, which is well-covered and growing.
CIBC also has an international segment, which includes operations within the United States. This helps to diversify the bank outside of its core domestic operations, making it a superb long-term pick.
SmartCentres is the third option to consider. SmartCentres is a retail-anchored real estate investment trust (REIT), which boasts a massive footprint across the country. The REIT also boasts an impressive tenant list, which includes some of the largest names in retail and finance.
Finally, unlike the other two stocks mentioned above, SmartCentres also boasts a monthly predictable distribution.
In short, all three stocks provide a unique perspective and opportunity. So, let’s now turn to when and then how much to invest.
When to start investing
There is no time like the present when it comes to finding a time to start investing. And despite the market being on a tear this year, the three stocks I mentioned are trading down over longer terms.
Fortis is a superb example. Despite being a great long-term defensive pick, the utility stock is down over 14% in the trailing two-year period. That drop is largely attributed to rising interest rates and not a reflection of the company’s performance.
The same can be said for CIBC. The bank stock trades down nearly 5% over that same two-year period and for the same interest rate-fueled reason.
We can see a steeper long-term dip with SmartCentres. And unlike Fortis and CIBC, that dip extends to this year. Over the prior two-year period, the stock has dipped a whopping 22%. As a result, the REIT’s distribution has swelled to 8.17%.
The key takeaway for investors is that these individual stocks, which offer juicy yields and long-term growth, still trade at a discount over the longer term. This makes them superb options to buy right now and hold for a longer term.
How much to invest
Finally, we come to how much to invest. If our goal is to reach the coveted $5,000 per year level, we can handily reach (if not surpass) this level by dropping $30,000 into each investment.
| Company | Recent Price | No. of Shares | Dividend Payout | Total | Frequency |
| Fortis | $54.53 | 550 | 2.36 | $1,298 | Quarterly |
| CIBC | $66.39 | 451 | 3.60 | $1,624 | Quarterly |
| SmartCentres REIT | $22.65 | 1324 | 1.85 | $2,450 | Monthly |
Keep in mind that prospective investors don’t need $90,000 right now. Investing is a long-term game. Investors can and should add what they can to their nest egg over a longer timeframe. Doing so allows your portfolio to grow on autopilot, thanks to dividend reinvestments.
In my opinion, the three stocks mentioned above are great options for any long-term income-producing portfolio.
Buy them, hold them, and watch them grow.
