Buy 7,895 Shares of This Top Dividend Stock for $500/Month in Passive Income

This top dividend stock is a huge player in the dividend scene, but it’s even more impressive that you can create insane passive income!

Amy Legate-Wolfe

Author Bio Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Social Media Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published August 20, 2024 9:15 pm EDT

A top dividend stock is like the golden goose of your investment portfolio. It just keeps laying those golden eggs! The key ingredients? Consistency, growth, and a solid financial foundation. You want a company that’s been paying dividends like clockwork for years — even better if they’ve been raising those dividends regularly. This shows the stock is not only reliable but also growing. Look for companies with low payout ratios (the percentage of earnings they dish out as dividends), as this means the stock is not overextending and can sustain payments even in tougher times.

Now, for that sweet monthly passive income, it’s all about the payout frequency. Some stocks pay quarterly, but if you mix in those juicy monthly dividend payers, you can smooth out your cash flow. REITs (real estate investment trusts) and certain income-focused funds often lead the charge here. They’re built to funnel a chunk of their profits back to shareholders every single month. This makes them ideal for those looking to cover regular expenses or just wanting to watch their account balance grow steadily. Now, let’s get into one stock that looks primed to power your passive income.

Pile of Canadian dollar bills in various denominations — Source: Getty Images

Choice Properties REIT

Choice Properties REIT (TSX: CHP.UN) has been a steady player in the Canadian dividend scene. Since its inception, CHP.UN has consistently rewarded its shareholders with regular dividend payments. While it might not be the flashiest stock on the TSX, it’s certainly one of the more reliable ones. The company has managed to keep its dividend payouts stable, even during rocky economic times. This says a lot about its underlying financial health and management’s commitment to returning value to investors.

Over the years, CHP.UN has maintained a respectable yield, making it a solid pick for those seeking steady, long-term income. While you might not see massive dividend hikes, you can count on those payments landing in your account like clockwork. This provides a dependable stream of passive income that dividend investors love. So, if you’re looking for a stock that’s more about consistency than wild excitement, CHP.UN fits the bill perfectly!

Momentum on the way

When it comes to considering CHP.UN as a dividend stock, it’s clear the stock is both steady and reliable. With a forward annual dividend yield hovering around 5.35%, CHP.UN offers an attractive payout for income-focused investors. The REIT has a strong track record of consistent dividend payments, and its recent yield shows it’s still committed to rewarding its shareholders. While it might not be the highest yield out there, the stability CHP.UN offers makes it a solid contender for those looking to build a dependable passive-income stream.

However, it’s worth noting that CHP.UN’s payout ratio is on the higher side at 84.42%. This means it’s returning a significant portion of its earnings to shareholders. While this is great for current income, it could limit the REIT’s ability to grow its dividends further down the road. Additionally, with a high debt-to-equity ratio of 249.71%, the company is quite leveraged. This might pose some risks if interest rates climb or the real estate market faces headwinds. Still, if you’re looking for a reliable dividend payer in the real estate sector, CHP.UN is definitely worth a look, especially if you value consistency over high-risk, high-reward plays.

Bottom line

Now, let’s say you want to create $500 from this dividend stock each month. That would mean putting a lot of investment in CHP.UN. However, the stock is trading at a good price for investors looking for monthly income at these levels. So, let’s see how much you’d need to invest to create $500 each month or $6,000 per year.

COMPANY	RECENT PRICE	NUMBER OF SHARES	DIVIDEND	TOTAL PAYOUT	FREQUENCY	PORTFOLIO TOTAL
CHP.UN	$14	7,895	$0.76	$6,000.20	Monthly	$110,530

As you can see, that’s no small number. And I would never recommend investors put all their eggs in one basket like this. However, it does show that investors can create significant income through investing in a stock like CHP.UN. As always, discuss these types of moves with your financial advisor before making any decisions.