How to Build a Powerful Passive Income Portfolio With Just $20,000

Investors seeking to build a solid passive income portfolio could consider investing in some of the top-quality dividend-paying companies. Fortunately, several Canadian companies have a solid payout history and growing earnings base, enabling them to reward their shareholders with regular dividend distributions. Their resilient payouts make them attractive investments for building a powerful income portfolio.

Against this backdrop, let’s look at three relatively less volatile Canadian stocks with fundamentally solid businesses and reliable payouts. Further, these companies can help investors build a powerful passive income portfolio with just $20,000.

Enbridge

Canadian energy companies are renowned for their solid dividend payments and growth, and Enbridge (TSX: ENB) stands out as one of the top picks. The company, which transports oil and gas, has a relatively resilient business model and generates solid earnings and distributable cash flows (DCF) in all market conditions, enabling it to distribute higher dividends to its shareholders.

Enbridge has paid dividends for 69 years in a row and raised its quarterly payouts for 29 consecutive years. Beyond higher dividends, Enbridge stock offers a high yield of 6.9% based on its closing price of $52.76 on August 6.

In the future, Enbridge is well-positioned to benefit from its highly diversified revenue sources and high asset utilization rate, which will drive its EPS and DCF per share. Further, long-term contracts and power-purchase agreements will support its financials. Additionally, its growing conventional and renewable energy assets, strategic acquisitions, and multi-billion secured projects will likely expand its earnings base and drive higher dividend payments.

Fortis

Investors planning to build a powerful passive-income portfolio could consider adding a few shares from the Canadian utility sector. Notably, the dividend payouts of utility stocks are covered through their relatively defensive business model, regulated earnings base, and predictable cash flows. Thanks to these attributes, utility companies consistently enhance their shareholders’ value through higher dividend payments.

Within the Canadian utility sector, Fortis (TSX: FTS) stands out for the durability of its distributions and visibility over future payouts. This regulated electric and gas utility company has consistently increased its dividend for over 50 years. Further, the company projects its dividends to grow by 4 to 6% annually through 2028. It also offers a worry-free yield of about 4%.

The company’s low-risk business model, predictable cash flows, and growing rate base support its dividend payouts. Since Fortis derives all its earnings from regulated utility businesses, its dividend payouts are well covered. Further, the company’s strategic focus on expanding its rate base through ongoing investments in regulated utility assets will likely be the key driver for future earnings and dividend growth. Fortis’ multi-billion-dollar capital projects will enable its rate base to grow by approximately 6.3% annually through 2028, allowing it to enhance shareholder returns via increased dividend payments.

Bank of Montreal

Leading Canadian banking stocks are also famous for their long dividend payment histories. One such stock is the Bank of Montreal (TSX: BMO), which has the longest dividend distribution history in Canada. This makes it an attractive stock for investors seeking passive income.

This financial services company has uninterruptedly paid dividends for over 195 years. Moreover, the bank has increased dividends at a compound annual growth rate (CAGR) of 5% in the past 15 years, which is impressive.

The bank’s diversified revenue base and focus on improving efficiency will drive earnings and enable it to pay higher dividends. Bank of Montreal’s earnings are forecasted to grow at a 7 to 10% CAGR over the medium term. This will drive higher dividend payments. Moreover, Bank of Montreal stock offers a healthy dividend yield of about 5.6%.

Bottom line

These three stocks are reliable investments for creating a powerful passive income portfolio. The table below shows that an investment of $20,000 in these stocks can help you earn over $274 every quarter, or about $1,096/year.