One of the biggest misconceptions about investing is that investors need tens of thousands of dollars to build an income portfolio. While investors do need some capital to invest, not all of that is needed upfront.
In fact, investors can build an income portfolio with just $5,000, and here are some of the stocks to make that happen.
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You need a defensive core to start with
Telus (TSX: T) is one of Canada’s big telecom stocks and a must-have for investors seeking to build an income portfolio. There are several reasons for this, and they can be summarized into the following.
First, Telus offers significant defensive appeal. Telecoms like Telus offer subscription-based services to customers. These segments, such as wireless and internet services, are becoming increasingly necessary in our fast-paced world.
The telecom stock also offers an insane dividend and an established cadence of semi-annual increases going back two decades. As of the time of writing, that dividend works out to a 7.3% yield.
For investors with just $5,000 to invest, that works out to enough in dividends to generate over a dozen new shares annually added through reinvestments alone.
Factor in those dividend increases, and you have a stellar long-term investment that will grow on its own. This makes Telus the perfect investment for any buy-and-forget portfolio.
Throw in a monthly income
RioCan Real Estate (TSX: REI.UN) is one of Canada’s largest REITs. The company boasts a portfolio of nearly 190 properties located primarily in Canada’s metro markets.
Those properties include a mix of different types of properties, which gives RioCan a defensive boost over some of its peers. Specifically, RioCan selects necessity-based anchor tenants such as grocers, personal services, and specialty retailers.
RioCan also offers a growing residential portfolio primarily comprised of residential towers in major metro markets sitting atop several floors of retail.
That mix of residential and retail provides RioCan investors with a diversified and defensive mix that will help to build an income portfolio.
As an income producer, RioCan shines. The REIT offers a monthly distribution, much like a landlord collecting rent. As of the time of writing, RioCan offers a tasty yield of 6.3%.
Like Telus, a $5,000 investment in RioCan will generate over a dozen shares each year, making this yet another top buy-and-forget holding to build an income portfolio.
Top it off with a stellar energy sector stock
One final pick for investors looking to build an income portfolio is Enbridge (TSX: ENB). Enbridge is one of the largest energy infrastructure companies on the market. The company is well-known for its lucrative pipeline network, which generates the bulk of its revenue.
Lesser known, but still important, is Enbridge’s growing renewable energy and natural gas utility segments. Both provide a recurring and stable revenue stream, which in turn fuels additional growth and Enbridge’s stellar quarterly dividend.
That dividend is the real reason investors who want to build an income portfolio will really love Enbridge. As of the time of writing, that dividend carries an appetizing yield of 5.7%.
This means that a $5,000 investment will allow investors to generate a handful of shares each year through reinvestments.
Prospective investors should also note that Enbridge has provided annual upticks to that dividend going back three decades without fail. This fact alone makes Enbridge a must-have for any well-diversified portfolio.
Will you build your income portfolio?
The trio of stocks mentioned above can provide investors with a juicy income portfolio over the longer term without a significant upfront investment.
In fact, investors with longer investment timelines can benefit significantly from investing in these stocks now while allowing reinvested dividends to fuel growth.
In my opinion, one or all of the above should be core holdings in any well-diversified portfolio.
Buy them, hold them, and watch your future income grow.
