How Investors Can Turn $20,000 Into Income That Just Keeps Coming

Turning $20,000 into a steady source of income is possible. One way to achieve this is by investing in high-quality dividend-paying stocks. Notably, many Canadian stocks, especially large-cap firms, consistently pay and grow their dividends. They maintain a sustainable payout ratio and have a resilient earnings base, enabling them to consistently pay dividends in the coming years.

Moreover, by reinvesting your dividends rather than withdrawing them, you allow your earnings to compound over time. This compounding effect can significantly expand your portfolio’s value, ultimately creating a self-sustaining stream of income that continues to grow year after year.

With that in mind, let’s explore two Canadian dividend stocks that have the potential to turn your $20,000 investment into a dependable source of passive income for the long term.

Canadian Natural Resources

Canadian Natural Resources (TSX:CNQ) is one of the top dividend stocks that can generate steady income for years. This oil and gas company has raised its dividend for 25 years in a row. Further, CNQ’s dividend grew at a compound annual growth rate (CAGR) of 21% during that period. It pays a quarterly dividend of $0.588 per share, yielding 5.4%.

CNQ’s resilient and growing dividends stem from its diversified portfolio of long-life, low-decline assets and a balanced production mix, which enable it to deliver consistent cash flow across market conditions. Beyond dividends, CNQ has also delivered solid capital gains. Over the past five years, the stock has grown at a CAGR of over 39%, delivering overall capital gains of about 422%.

The company’s long-life, low-decline reserves and efficient operations will likely drive profitability. Further, CNQ’s inventory of quick-to-execute, low-capital projects augurs well for growth. Moreover, Canadian Natural’s vast undeveloped land base provides years of drilling potential, strengthening its growth outlook.

Telus

Communications giant Telus (TSX:T) is another attractive stock to generate steady income. Telus has an impressive record of rewarding shareholders, having distributed roughly $23 billion in dividends since 2004. Moreover, it has raised its quarterly dividends 27 times since 2011 through a multi-year dividend growth program. Currently, it offers a high yield of about 8%.

The payouts of this Canadian telecom leader are supported by its diverse revenue streams and low customer churn rate. Further, its focus on acquiring margin-accretive customers and cost-reduction initiatives drives its earnings and dividend payments. While it is expanding fibre-optic coverage, investments in 5G capabilities are strengthening its network infrastructure and driving subscriber growth. Besides communication services, Telus Health is picking up pace, strengthening its future outlook.

Telus offers visibility over future distributions. It plans to increase its dividend by 3–8% annually through 2028. Moreover, the telecom leader has a sustainable payout ratio of 60–75% of free cash flow.

Earn over $1,333 in passive income

Canadian Natural Resources and Telus are compelling stocks for investors seeking to generate steady income for life. An investment of $20,000 in these stocks would generate approximately $333.40 in quarterly income, or about $ 1,333.60 per year.