Investing is not a one-time event but a lifelong habit. However, a one-time investment can give you life-long returns, provided you stay invested. If you have a windfall gain and are worried that you may spend it all, a good approach is to invest it in large dividend growth stocks. They are not as risky as growth stocks, and they also give regular income every year.
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Two stocks that could convert $20,000 into $3,480 in annual income
The TSX is a gold mine of dividend stocks that not only grow their dividends but also offer dividend reinvestment plans (DRIP).
Canadian Tire stock
Canadian Tire (TSX: CTC.A) is one of the largest retailers in Canada. It has diverse product offerings of its brands and other brands, discretionary items, and essential items. Its financial services arm also provides retail loans and earns interest on them. The company keeps optimizing its supply chain, removing and adding stores depending on store sales.
The retailer performs well in a growing economy and stays strong in a weak economy. It shares its strong performance with shareholders through double-digit dividend growth. It has grown dividends in 21 of the last 22 years at an average annual rate of 14%. The one year that it did not grow its dividend was 2010, after the 2009 Great Financial Crisis.
Telus stock
Telus Corporation (TSX: T) is one of the largest telecom operators in Canada and enjoys a strong subscriber base. In the digital age, the internet is becoming more relevant. With the advent of 5G, the internet will not only be in mobile phones and laptops but also your security cameras, traffic lights, cars, drones, and more. The proliferation of the internet and digitization has called for the need for bundled services such as business solutions, cybersecurity, and cloud solutions.
Telus will tap the digital and artificial intelligence (AI) age by providing the connected infrastructure. In the last 21 years, the telco has enjoyed the 3G, 4G, and 5G long-term evolution and increased its dividend at an average annual rate of 12.4%. Its dividend growth rate has now slowed to 7% and could slow further in the coming years as the company’s earnings grow consistently and sustainably.
How these stocks can convert $20,000 into $3,480 in annual income
You could consider investing $10,000 in each of the two stock’s DRIP and let the dividends buy more income stocks. To make a rough calculation of what to expect from Canadian Tire, we assume the stock price grows by 5% annually and the dividend by 8%.
| Canadian Tire Stock Price (5% CAGR) | Year | DRIP Shares | Total share count | Canadian Tire Dividend per share (8% CAGR) | Dividend Income |
| $145.00 | 2025 | 69 | 69 | $7.10 | $489.90 |
| $152.25 | 2026 | 3.2 | 72.2 | $7.66 | $553.77 |
| $159.86 | 2027 | 3.5 | 75.7 | $8.28 | $626.75 |
| $167.86 | 2028 | 3.7 | 79.4 | $8.94 | $710.29 |
| $176.25 | 2029 | 4.0 | 83.4 | $9.65 | $806.04 |
| $185.06 | 2030 | 4.4 | 87.8 | $10.43 | $915.96 |
| $194.31 | 2031 | 4.7 | 92.5 | $11.26 | $1,042.35 |
| $204.03 | 2032 | 5.1 | 97.6 | $12.16 | $1,187.90 |
| $214.23 | 2033 | 5.5 | 103.2 | $13.14 | $1,355.80 |
| $224.94 | 2034 | 6 | 109.2 | $14.19 | $1,549.81 |
A $10,000 investment can buy 69 shares of Canadian Tire at $145 per share. The retailer is expected to give a $7.10 dividend per share in 2025, which will convert to $489.90 in dividend income on 69 shares. This money will be reinvested to buy DRIP shares, which can be in decimal points.
Assuming the share price increases by 5% to $152.25, the dividend can buy 3.2 DRIP shares. Canadian Tire may not grow its dividend by 8% next year, but we have taken an average to help you understand how your money will compound. In 10 years, the dividend could compound to $1,549 a year.
A similar calculation can be made for Telus, assuming 6% dividend growth till 2029 and 4% growth beyond that. The share price was assumed to be at $30 till 2030 and $35 till 2034, supposing the 5G opportunity revives the share price. A $10,000 investment today in Telus DRIP converts to $1,930.90 in dividend income annually. The combination of the two dividends is $3,480 per year.
