Creating multiple passive income sources will help you reach your retirement goals sooner and accelerate the wealth creation journey. One of the most popular ways to create a passive income stream is by investing in real estate properties and renting them out to tenants. However, as an asset class, real estate is expensive and illiquid. Moreover, you have to account for expenses such as maintenance, taxes, commissions, and vacancy periods.
Alternatively, investing in dividend stocks is a low-cost way to begin a passive income stream almost instantly. Here, you identify a portfolio of fundamentally strong companies that can pay and raise dividends even when the economy enters a recession.
By gaining exposure to quality dividend stocks, investors should benefit from long-term capital gains in addition to a steady stream of recurring income.
How can you earn $400 per month in dividends?
A monthly payout of $400 translates to annual dividends of $4,800. Now, a company’s dividend yield and its share price are inversely related.
So, a company with a share price of $100 and an annual dividend of $5 per share offers you a yield of 5%. If the stock falls to $80, the dividend yield will increase to 6.25%. Conversely, if the stock surges to $125, the yield will drop to 4%.
The dividend amount you generate depends on the company’s annual yield. For instance, investing $100,000 in a stock with a 4.8% yield will help you earn $4,800 in annual dividends.
Invest in quality TSX dividend stocks
While there are several high-dividend stocks trading on the TSX, just a handful of these companies are positioned to deliver outsized gains over time. One such blue-chip TSX dividend stock is Brookfield Renewable Partners (TSX:BEP.UN).
Valued at a market cap of $26 billion, Brookfield Renewable Partners pays shareholders an annual dividend of US$1.42 per share, translating to a forward yield of 4.9%. Moreover, these payouts have risen from US$0.87 per share in 2011.
Founded in 1999, Brookfield Renewable Partners owns and operates a portfolio of power-generating facilities in the Americas, Europe, India, and China. It generates electricity through hydroelectric, wind, solar, distributed generation, and biomass sources. With an installed capacity of over 21,000 megawatts, Brookfield Renewable is a clean energy giant and a top investment choice in October 2024.
The TSX dividend stock trades almost 40% below all-time highs due to rising interest rates and a sluggish macro environment. Notably, the pullback allows you to buy the dip and benefit from outsized gains when market sentiment improves.
In the last decade, Brookfield Renewable stock has returned 273% to shareholders in dividend-adjusted gains, comfortably outpacing the TSX index.
The Foolish takeaway
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| Brookfield Renewable Partners | US$28.22 | 3,381 | US$0.355 | US$1,200 | Quarterly |
Given its dividend yield, you must buy 3,381 company shares worth $95,411 to earn $400 in monthly dividends or $4,800 annually. If the company raises these payouts by 10% each year, your dividend income should double in the next seven years.
This article provides an example of the benefits of investing in quality dividend stocks such as Brookfield Renewable. Canadian investors should add other such stocks to their dividend portfolio to benefit from diversification and lower risk.
