Invest $15,000, Create $4,326.15 in Passive Income From This Dividend Stock

We could all use some extra cash on hand, and this dividend stock could create loads of it.

| More on:
senior relaxes in hammock with e-book

Source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

When searching for passive income opportunities through dividend stocks, there are a few essential considerations to keep in mind, especially if you’re looking to turn a $15,000 investment into a large passive income. So today, let’s look at how to get started, what to watch, and earning that income for life.

Getting started

First, evaluate the dividend yield of your dividend stock, which reflects the annual dividend payment relative to the stock price. A higher yield can provide substantial income, but it’s crucial to ensure the yield isn’t abnormally high due to a declining stock price. This could indicate potential risks. Instead, aim for a yield that’s competitive and supported by stable earnings.

Second, examine the payout ratio. This ratio tells you what portion of the dividend stock’s earnings is being paid out as dividends. A sustainable payout ratio, typically below 70%, indicates that the dividend stock retains enough earnings for growth and operations while rewarding shareholders. Companies with excessively high payout ratios might struggle to maintain dividends during economic downturns.

Next, analyze the dividend stock’s financial health and growth potential. Look for strong profitability, consistent revenue growth, and manageable debt levels. A dividend stock that’s financially stable is more likely to sustain and grow its dividends over time, making it a more reliable source of passive income.

Created with Highcharts 11.4.3Igm Financial PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

IGM’s reliable dividend

IGM Financial (TSX:IGM) on the TSX stands out as a strong dividend stock for several reasons. With a forward annual dividend yield of 5% and a payout ratio of 61.1%, IGM offers a sustainable and attractive income stream for investors. The wealth and asset management company’s revenue growth of 10.2% year-over-year and quarterly earnings growth of 14% highlight its robust financial performance and resilience in the wealth management sector.

In recent earnings (up to September 30, 2024), IGM posted trailing 12-month revenue of $3.7 billion, along with a profit margin of nearly 30%. This profitability underscores its ability to generate solid returns while maintaining operational efficiency. Furthermore, IGM stock’s quarterly dividend of $0.56 per share demonstrates a commitment to rewarding shareholders consistently.

Past performance shows that IGM has been a reliable income stock with a five-year average dividend yield of 5.9%. Its ability to maintain dividends through various economic cycles reflects the strength of its business model and its focus on wealth management services. These remain in demand regardless of market conditions.

Future growth

Looking ahead, IGM’s forward price-to-earnings ratio of 10.4 suggests it is reasonably valued compared to its earnings potential. Its robust cash flow of over $1 billion in operating cash flow and $978.9 million in levered free cash flow provides ample room for dividend payments – plus potential future increases.

IGM’s balance sheet also supports its dividend reliability. With a debt-to-equity ratio of 33.8% and a current ratio of 2.2, the company maintains a healthy balance of liabilities and assets, ensuring it can meet both short- and long-term obligations without compromising dividend payments.

Investors seeking passive income should also consider the broader economic outlook. IGM’s focus on financial services positions it well in an environment where wealth management and financial planning are increasingly valued. Its resilience during fluctuating market conditions adds an extra layer of security for dividend-focused investors.

Bottom line

Now let’s say that IGM stock rises by another 24% in the next year. Add in its dividend, and here is what that $15,000 could turn into.

COMPANYRECENT PRICENUMBER OF SHARESDIVIDENDTOTAL PAYOUTFREQUENCYTOTAL INVESTMENT
IGM – now$44.71335$2.25$753.75quarterly$15,000
IGM – 24%$55.44335$2.25$753.75quarterly$18,572.40

There you have it. Now you’ve created $3,572.40 in returns and $753.75 in dividends – a grand total of $4,326.15 in passive income! Altogether, finding a strong dividend stock for passive income involves assessing yield, payout sustainability, financial health, and growth potential. IGM Financial excels in all these areas, making it a compelling choice for income-seeking investors. Its stable dividends, strong earnings growth, and solid financial foundation create a winning formula for those aiming to build long-term wealth through dividends.

Should you invest $1,000 in IGM Financial right now?

Before you buy stock in IGM Financial, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and IGM Financial wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Dividend Stocks

analyze data
Dividend Stocks

How I’d Invest $28,000 in Canadian Natural Resource Stock to Amass Personal Wealth

Investing in TSX dividend stocks such as Enbridge can help you earn a passive-income stream in 2025.

Read more »

hand stacks coins
Dividend Stocks

Got $400? How I’d Start Building Income With 3 High-Yield Stocks for the Long Term

These high-yield dividend stocks have a solid payout history, making them compelling investments to generate passive income.

Read more »

A close up color image of a small green plant sprouting out of a pile of Canadian dollar coins "loonies."
Dividend Stocks

I’d Put $15,000 in These 3 Dividend-Growth Champions for Increasing Income Potential

Want to offset some volatility? Here are three defensive dividend-growth champions that can generate a juicy yield right now.

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

Transform Your TFSA Into a Cash-Creating Machine With $7,000

Discover how the Tax-Free Savings Account can be your golden goose for generating cash without losing your investment.

Read more »

monthly desk calendar
Dividend Stocks

How I’d Invest $10,000 in Canadian Value Stocks for Monthly Dividend Income

A $10,000-diversified portfolio of value stocks focusing on dividend safety, yield, growth, and payment schedules can provide a reliable source…

Read more »

a person watches a downward arrow crash through the floor
Dividend Stocks

Is This Correction Your Chance? Top 4 Canadian Dividend Stocks on Sale

Stocks may be down, but now is your chance to get some of these top dividend stocks on sale.

Read more »

Confused person shrugging
Dividend Stocks

Where to Invest $2,500 in the TSX Today

These TSX stocks offer attractive dividends and a shot at decent upside on a rebound.

Read more »

Pile of Canadian dollar bills in various denominations
Dividend Stocks

Invest $25,000 in These Dividend Stocks for $1,956.66 in Annual Passive Income

Dividends stocks can make a huge difference, even if shares don't move an inch. And these might be the best.

Read more »