With inflation rising faster than income, active income is not sufficient to meet expenses or an unexpected expense reduces your savings. And with the tariff war intensifying, the 2022 inflation of 7-8% could be a possibility. Canadians have just started to adjust to the increased prices of 2022, and now there is another probability of rising prices. This has highlighted the need to build passive income.
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Why investing at a dip makes sense
The Canada Revenue Agency (CRA) introduced the Tax-Free Savings Account (TFSA) during the 2009 Great Financial Crisis to encourage savings and investments. The current economic scenario is reiterating the importance of TFSA and savings. A market downturn is an apt time to invest. Those who invested $10,000 in Telus‘s (TSX: T) dividend-reinvestment plan (DRIP) in 2010 started with just $571 in 2010 and now earn $3,650 in annual passive income. A major reason for such high growth is they invested in the dip.
| Year | Dividend | Telus Stock Price | New Shares Added | Total Share Count | Total Dividend Amount |
| 2025 | $1.61 | $26.00 | 124.56 | 2,240.66 | $3,605.68 |
| 2024 | $1.53 | $23.58 | 120.95 | 2,116.11 | $3,238.49 |
| 2023 | $1.43 | $26.13 | 96.77 | 1,995.16 | $2,851.88 |
| 2022 | $1.33 | $29.79 | 76.73 | 1,898.39 | $2,528.66 |
| 2021 | $1.25 | $25.21 | 80.46 | 1,821.66 | $2,285.82 |
| 2020 | $1.17 | $25.14 | 73.47 | 1,741.19 | $2,028.49 |
| 2019 | $1.11 | $22.63 | 72.60 | 1,667.73 | $1,847.01 |
| 2018 | $1.03 | $23.81 | 62.59 | 1,595.12 | $1,642.98 |
| 2017 | $0.97 | $21.38 | 61.91 | 1,532.53 | $1,490.38 |
| 2016 | $0.90 | $19.13 | 60.45 | 1,470.62 | $1,323.56 |
| 2015 | $0.82 | $20.94 | 48.13 | 1,410.18 | $1,156.34 |
| 2014 | $0.74 | $18.28 | 47.46 | 1,362.04 | $1,007.91 |
| 2013 | $0.66 | $16.27 | 46.38 | 1,314.58 | $867.62 |
| 2012 | $0.60 | $14.41 | 45.60 | 1,268.20 | $754.58 |
| 2011 | $0.54 | $11.37 | 50.26 | 1,222.60 | $657.15 |
| 2010 | $0.49 | $8.53 | 1,172 | 1,172 | $571.51 |
In 2010, Telus shares were trading around $8.53 because of the Great Recession of 2009. Investing $10,000 at that time helped you buy 1,172 shares. Over the years, the company grew its dividend by double digits, buying more DRIP shares. The effect of compounding kicked in, and the dividend income doubled every seven years. However, the first 100% dividend income jump took only five years because of buying the dip.
Buying the dip accelerates the returns and helps you catch up on lost years of investing.
Invest $10,000 in Telus’s stock and create $2,270 in annual passive income
Now is a good time to buy as Telus stock is trading near its nine-year low of around $21. A $10,000 investment can buy 480 shares of Telus. While it would be difficult to replicate returns of the past, Telus can still offer good returns.
The telco slowed its dividend growth rate from 10% during the 2010-2017 period to 7% now. Hence, I have assumed an annual dividend growth rate of 6% in the next 10 years and a Telus share price of $30.
| Year | Telus DRIP shares at $30/share | Total share count Telus | Telus Dividend per share (6% CAGR) | Total Dividend income |
| 2025 | 480.00 | $1.6061 | $385.46 | |
| 2026 | 6.42 | 486.42 | $1.7024 | $828.11 |
| 2027 | 27.60 | 514.03 | $1.8046 | $927.61 |
| 2028 | 30.92 | 544.95 | $1.9129 | $1,042.41 |
| 2029 | 34.75 | 579.70 | $2.0276 | $1,175.41 |
| 2030 | 39.18 | 618.88 | $2.1493 | $1,330.14 |
| 2031 | 44.34 | 663.21 | $2.2782 | $1,510.96 |
| 2032 | 50.37 | 713.58 | $2.4149 | $1,723.25 |
| 2033 | 57.44 | 771.02 | $2.5598 | $1,973.69 |
| 2034 | 65.79 | 836.81 | $2.7134 | $2,270.62 |
As the company has already paid dividends for the first two quarters, 480 shares may only earn you $385.46 in semi-annual dividends. The DRIP could keep buying more Telus shares from dividend money. For ease of calculation, I have taken the annual dividend amount to buy DRIP shares and an average share price of $30 to normalize the price volatility.
The stock price could grow faster if the 5G boom picks up and drives Telus revenue streams. If the telco grows its revenue from the 5G infrastructure despite rising competition, the dividend growth rate and stock price could rise faster.
The compounding effect could accumulate 836.8 shares and grow your annual passive income to $2,270 by 2034.
