How to Build a Bulletproof Monthly Passive-Income Portfolio With Just $10,000

Here’s how to build a diversified portfolio with dividend stocks that, as a group, pay out in every month of the year to earn monthly passive income

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To build a bulletproof monthly passive-income portfolio, investors can focus on stocks with dividend growth and a solid balance sheet with manageable debt levels. For example, you can explore businesses that have lower leverage compared to their peers.

If you’re looking for only monthly income stocks, there are few choices available in Canada. Mostly, we have Canadian real estate investment trusts (REITs) that pay out monthly cash distributions. Otherwise, investors can aim to build a diversified portfolio with dividend stocks that, as a group, pay out dividends in every month of the year to achieve the target of earning monthly passive income. This method will provide better diversification.

Here are some TSX stocks that pay out dividend income in different months. For this method, investors need to take note of the dividend dates, as explained below.

Fortis stock

Fortis (TSX:FTS) is a blue chip dividend stock for growing passive income. It has paid a growing dividend for half a century. This year, its dividend continues to be sustainable with a payout ratio of about 74% of adjusted earnings. As a regulated utility primarily owning essential distribution and transmission assets, Fortis makes highly resilient earnings even through bad economic times.

Recent history shows that Fortis pays out a quarterly dividend in March, June, September, and December. For example, its last ex-div-date was May 16, 2024. Investors needed to own the stock before the ex-div-date to receive that dividend on the payable date on June 1, 2024.

At $52.70 per share, the stock appears to be fairly valued in a higher-interest environment. That said, versus its long-term normal price-to-earnings ratio (P/E), it is discounted by about 14%. At the recent price, it also offers a decent dividend yield of almost 4.5%.

RBC stock

As a leading Canadian bank, Royal Bank of Canada (TSX:RY) also pays out safe dividends that increase over time. It has core operations in personal and commercial banking as well as a wealth management business that makes up close to a third of its revenues. Its payout ratio is estimated to be sustainable at about 48% of adjusted earnings this fiscal year.

RBC pays out a quarterly dividend in February, May, August, and November. For example, its next ex-div-date is July 25, 2024. Investors need to own the stock before the ex-div-date to receive that dividend on the payable date on August 23, 2024.

At about $142 per share, the Canadian bank stock seems to be fairly valued, which is supported by the fact that it trades at its long-term normal valuation – a P/E of about 12.3.

These two stock ideas cover dividends for two-thirds of the year, but it is nowhere near a diversified portfolio. Investors should own at least 10 solid stocks driven by underlying quality businesses from different sectors. If you have $10,000 to invest, you can divide it evenly across these stocks.

The 11 sectors classified by the Global Industry Classification Standard (GICS) are energy, materials, industrials, consumer discretionary, consumer staples, health care, financials, information technology, communication services, utilities, and real estate. Fortis falls in the utilities sector and RBC falls under financials.

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 Kay Ng has positions in Fortis and Royal Bank of Canada. The Motley Fool recommends Fortis. The Motley Fool has a disclosure policy.

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