Want $500 Each Month in Passive Income? Here's How Much You Need

Want $500 Each Month in Passive Income? Here’s How Much You Need

Want some passive income? You don’t have to find some risky dividend stocks. In fact, you can create tons of passive income with one ETF!

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 October 22, 2024 4:20 pm EDT

If you’re looking to generate $500 a month in dividends, you do not need to suddenly go find the dividend stock with the highest yield and a soaring payout ratio. In fact, there are exchange-traded funds (ETF) offering high yields, with far less risk!

One such dividend ETF is the Harvest Diversified Monthly Income ETF (TSX: HDIV). It stands out as a top option. With a high dividend yield of approximately 10.9% at writing, HDIV provides consistent income while benefiting from exposure to a diversified range of sectors and large global companies. These attributes make it a reliable choice for investors focused on monthly payouts.

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Diving into HDIV

What makes HDIV particularly appealing is its active management approach, combining top-performing ETFs in sectors like healthcare, technology, and utilities. HDIV’s portfolio includes well-established Harvest ETFs like the Healthcare Leaders ETF and the Tech Achievers Growth & Income ETF. These are designed to tap into powerful long-term growth trends while also generating income through a covered call strategy. This balance between growth potential and steady income creates a compelling case for those wanting consistent monthly dividends.

In terms of performance, HDIV has shown impressive returns, with year-to-date growth of over 23%. The combination of modest leverage (around 1.25x) and covered calls on up to 33% of its holdings helps to boost income while managing risk.

Looking ahead

The management team at Harvest Portfolios Group, which oversees HDIV, has a strong track record in crafting ETFs designed for income-focused investors. They strategically rebalance HDIV’s portfolio to ensure it stays aligned with market trends, enhancing both income and growth opportunities. Their expertise ensures that HDIV maintains its high distribution rate, which has consistently remained around $0.0741 per unit on a monthly basis.

Looking ahead, HDIV is well-positioned for future success. The ETF’s focus on sectors like healthcare and technology are industries poised for long-term expansion. This gives it a growth edge, while the active covered call strategy ensures that it can continue delivering stable income even during market volatility. As more investors seek reliable income streams, especially in uncertain economic times, HDIV’s appeal will likely grow.

Bottom line

So how much would investors need to put away to reach that $500 per month? Right now, you can pick up shares at $18. Plus, the dividend is at $1.95 annually. So to get to that $500 per month in dividends alone, or $6,000 per year, here’s what you’d need to put away.

COMPANY	RECENT PRICE	NUMBER OF SHARES	DIVIDEND	TOTAL PAYOUT	FREQUENCY	INVESTMENT
HDIV	$18	3,077	$1.95	$6,000.15	monthly	$55,386

There you have it. A $55,386 investment would create $500 per month. And it’s not just in one dividend stock. It’s in a diversified ETF up 23% year-to-date already! HDIV, therefore, combines a high yield with a diversified portfolio, making it an excellent option if your goal is to generate $500 per month in dividends. Its focus on growth sectors, strong management, and consistent monthly payouts creates a winning combination for passive income seekers. With HDIV, you’re not just investing in dividends. You’re investing in a future of growth and stability.