Establishing a portfolio of passive-income stocks is something that all investors want. Unfortunately, finding the right stocks to meet that passive-income goal can be daunting. Additionally, differing payout periods and the need to diversify add to those woes.
The good news is that it is possible to build an affordable portfolio of passive-income stocks that can provide a healthy income. Even better, it can be done with just a handful of stocks that pay monthly.
Here’s a look at a handful of affordable passive-income stocks that pay out monthly for any investor.
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Forget the rental property mortgage: Here’s a lower-risk option
Buying and renting out a property has long been one of the preferred options to establish a passive-income stream. Unfortunately, buying a property has become more difficult in recent years.
Specifically, would-be landlords need to worry about a growing laundry list of issues. That includes rising downpayment costs, surging interest rates, finding a tenant and keeping up with property taxes and the mortgage itself.
Fortunately, there is a better way, and that involves investing in a REIT like RioCan Real Estate (TSX: REI.UN). RioCan is one of the largest real estate investment trusts (REITs) in Canada, with a portfolio of nearly 190 properties scattered around the country.
Historically, RioCan’s portfolio mix has leaned more toward commercial and retail properties, but that mix is changing. Specifically, RioCan is investing heavily in mixed-use residential properties.
RioCan refers to these mixed-use sites as RioCan living, and it represents a huge opportunity for those priced out would-be landlords.
The sites are located on high-traffic corridors in Canada’s metro areas. The properties themselves comprise residential towers sitting above several floors of retail. This gives them a more diversified appeal than owning a single property.
Additionally, much like a landlord collecting rent, RioCan pays out a juicy distribution on a monthly cadence. As of the time of writing, RioCan pays out a juicy 6.60%, which makes it one of the better-paying passive-income stocks on the market.
It also means investors with $40,000 to drop on RioCan can earn a monthly income of just over $220.
Keep in mind that the initial investment needed is still considerably smaller than a typical downpayment. It also comes without needing a tenant or any costly repairs.
Oh, and perhaps best of all, note that investors who aren’t ready to draw on that income yet can choose to reinvest it until needed. This allows any passive income to grow until needed.
Another option for passive-income stocks
Have you heard of Exchange Income Corporation (TSX: EIF)? Not many investors may recall what Exchange does, but once you learn about the company, few can forget.
Winnipeg-based Exchange operates a growing portfolio of subsidiary companies. The company has over one dozen of these subsidiaries, broadly falling into two categories: aviation and manufacturing.
By way of example, on the manufacturing side of the business, Exchange’s subsidiaries include a manufacturer of advanced window wall systems used in high-rise buildings. Turning to the aviation side of the operation, Exchange’s subsidiaries provide passenger and cargo service to the remote regions of Canada’s north.
Interestingly, Exchange’s subsidiaries all have two key themes in common. First, despite their very different purposes, they provide a necessary service for which there is little or no alternative. This gives those businesses significant demand and defensive appeal.
More importantly, and thanks to that sheer necessity, those businesses generate free cash for Exchange. This allows the company to invest in growth initiatives and continue to pay a very handsome monthly dividend.
As of the time of writing, that dividend pays out a generous 6.03%, making it one of the better-paying options on the market. Additionally, Exchange has provided annual upticks to that dividend 17 times in the past 19 years. That fact alone makes the stock appealing to investors looking for passive-income stocks to buy.
Using that same $40,000 example from above, prospective investors who invest that sum in Exchange can expect to generate a monthly income of just over $200.
And like RioCan, that income can be reinvested until needed, allowing it to grow further.
Building your passive-income stream shouldn’t be hard
Both RioCan and Exchange boast growth and income-earning potential. They also offer a juicy monthly dividend that is hard for investors seeking passive-income stocks to ignore.
In my opinion, one or both should be holdings in part of any well-diversified portfolio.
Buy them, hold them, and watch your future passive income grow.
