Building a passive-income portfolio can provide significant long-term financial security for Canadians. By investing in dividend-paying stocks, exchange-traded funds (ETF), and bonds, you can generate consistent income without having to sell your investments. For example, a study by RBC Wealth Management found that reinvesting dividends can account for up to 33% of total equity returns over time. By focusing on compounding and regular income, Canadians can effectively grow their wealth while enjoying steady passive-income streams during retirement.
Where to look
When it comes to sectors that provide the most long-term strength for passive income, utilities and financials are top contenders. Utility companies, like those involved in electricity, water, and natural gas, offer stable revenues because people consistently need these services, regardless of economic conditions. These companies often pay reliable dividends. The financial sector, particularly Canadian banks, is also known for its dividend strength. Canadian banks have a history of dividend growth, providing income-seeking investors with stability and growing returns over the years.
The real estate sector is another solid option for long-term passive income. Real estate investment trusts (REITs) allow investors to access the benefits of real estate without direct property management. REITs must pay out most of their income as dividends, making them a great source of passive income. Investing in sectors like utilities, financials, and real estate gives Canadians a diversified approach to building a strong and stable passive-income portfolio.
Get it all
BMO Covered Call Utilities ETF (TSX:ZWC) is an excellent choice for passive-income investors wanting in on it all. This ETF focuses on utility companies and enhances income through covered call options. With a current yield of around 6.85% at writing, ZWC offers an attractive return. Ideal for investors looking to benefit from stable sectors like utilities. The covered call strategy adds an extra layer of income by selling options on stocks in the portfolio. This can generate additional income in a flat or mildly rising market.
In addition to the high yield, ZWC provides exposure to well-established Canadian utility companies. These companies are known for their reliable revenue streams, making the ETF less volatile than others. By investing in ZWC, Canadians can enjoy both capital preservation and the higher income generated from the covered call strategy, making it a great option for long-term income.
Select dividends
iShares Core MSCI Canadian Quality Dividend Index ETF (TSX:XDIV) is another excellent investment for passive income. XDIV focuses on high-quality, dividend-paying Canadian stocks, offering a yield of around 4.58% at writing. The ETF is designed to track the performance of the top 30 dividend-paying companies in Canada. Thus making it a solid choice for those looking to invest in blue-chip stocks with strong, consistent dividends.
XDIV’s holdings include major Canadian banks, utilities, and energy companies, all sectors that have historically provided stable returns. With its focus on dividends and blue-chip stocks, XDIV allows investors to benefit from capital growth and passive income. Thus making it a reliable long-term investment. The combination of solid yield and dividend-growth potential makes XDIV a great option for Canadians looking to enhance their passive-income portfolios.
Bottom line
So, let’s say you put $10,000 towards both of these ETFs right now. Here is what that could create in dividends this year alone!
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | PORTFOLIO TOTAL |
| ZWC | $17.90 | 559 | $1.20 | $670.80 | monthly | $10,000 |
| XDIV | $28.88 | 346 | $1.27 | $439.42 | monthly | $10,000 |
That’s right; you can add another $1,110.22 in dividend income! Investing in a passive-income portfolio is a smart long-term strategy for Canadians, especially when diversified across strong sectors like utilities and financials. With options like BMO Covered Call Utilities ETF (ZWC) and iShares Canadian Select Dividend ETF (XDIV), these ETFs allow for steady income with the potential for capital growth. By balancing high dividends with stable sectors, Canadians can create a reliable financial cushion for the future.
