How long does it take to earn $1,000 in passive income a year? You can start earning this as early as next month with a $83 monthly payout. Now is an opportune time to lock in high yields of more than 9% on dividend stocks that pay cash every month.
When you are planning your income portfolio with immediate payouts, you have to look at three things:
- The safety of the dividends
- The frequency of the payout
- And the yield you lock in
Stocks that meet the expectation level of all three segments could keep your investment returns more predictable.
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Two dividend stocks to earn passive income in 2024
I used the above criteria to shortlist two dividend stocks that can earn you immediate passive income.
Timbercreek Financial
The high interest rate environment has been putting downward pressure on the real estate sector as property prices fell. The property buying activity has been slow, putting the entire supply chain from real estate investment trusts (REITs) to lenders to developers in a downtrend. Timbercreek Financial (TSX: TF) stock also plunged even though the rising interest rate increased its interest income to a new high.
Timbercreek Financial provides short-term mortgages to commercial REITs for property acquisition, development, and other reasons. It earns from loan processing fees and interest on the mortgage. It ended 2023 with a loan portfolio that generated a 10% yield. The company also gave a bonus dividend to its shareholders. However, the stock plunged 7% in early May when it released relatively weaker earnings.
Its first-quarter net investment income fell 25% year over year to $24.6 million as its total loan portfolio fell to $862.8 million (from $1.18 billion a year ago). Many REITs repaid their loans, and very few took new loans because of high interest rates. It shows that the company has reached the peak of high-interest income. The next growth cycle will come from more loans when interest rates fall, encouraging lending.
Thankfully, the Bank of Canada has announced the first rate cut in June, which could revive Timbercreek Financial’s loan activity and drive revenue.
However, the pullback in the first-quarter income inflated Timbercreek’s dividend-payout ratio to 90.6% of the distributable income. This ratio will fall as income from processing fees revives from higher loan activity. TF’s dividends are relatively safe, and the May dip in the stock price has inflated its dividend yield to 9.5%. Now is a good time to buy this stock while it trades near its pandemic low of around $7 before the stock price surges on the revival of loan activity.
Slate Grocery REIT
Continuing on the real estate supply chain, Slate Grocery REIT’s (TSX: SGR.UN) unit price has plunged 34% since the interest rate hike began in April 2022. Like all REITs, even Slate Grocery REIT saw a decline in net income due to a decrease in the fair market value of the property. However, it continued to enjoy a 94.4% occupancy. It leased or renewed leases at a 10.8% higher rental income. The REIT can charge a higher rent as its rent is lower than that of its competitors, giving it enough room for a rent hike without losing out on tenants.
It distributed 80% of its funds from operations as payouts to unitholders. A healthy payout ratio indicates that the REIT has the financial flexibility to continue paying dividends even in a weak real estate market, as rental income remains unaffected. The dip in its unit price has created an opportunity to lock in a 10.75% yield.
How to create $1,000 in annual passive income
| Stock | Dividend Yield | Current Share Price | Share Count | Total Dividend in 2024 |
| Slate Grocery REIT | 10.75% | $11.05 | 452 | $533.36 |
| Timbercreek Financial | 9.50% | $7.3 | 685 | $472.65 |
| Total | $1,006.01 |
The above two stocks have high yields that have relatively safe dividends. They are a gold mine for value seekers as high yields generally come with higher risk. If you invest $5,000 in each of the two stocks, you could earn $1,000 in passive income over the next 12 months.
