The stock market is an incredible place to earn income. Unlike owning an asset like real estate, stocks are completely liquid (easy to buy or sell) and affordable to purchase (often at low single-dollar or no-fee commissions).
Unlike real estate, you don’t need millions to buy a passive income-yielding asset. In fact, $20,000 could buy you a diverse portfolio of stocks that earn attractive dividends and hopefully capital gains over time.
If you are wondering how to create an investment cash flow machine, here’s a $20,000 portfolio that is split evenly across four quality dividend stocks. This portfolio would average passive income of $79.02 per month, or $948.24 annually.
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An energy infrastructure stock for safe income
The first dividend stock I would deploy $5,000 into is Pembina Pipeline (TSX: PPL). With a $0.71 per share quarterly dividend, Pembina stock yields 5.4% today. A $5,000 investment would earn $66.03 quarterly or $264.12 annualized.
Pembina operates a crucial franchise of gathering and egress pipelines, gas processing facilities, storage, and export terminals. For many Western Canadian producers, Pembina offers a primary way to get commodities to market.
Pembina is interesting because it has a great balance sheet, quality contracted assets, an attractive mix of growth opportunities, and a cheap valuation compared to peers. Its dividend is well supported by cash flows, so it is a great addition before that valuation aligns closer to the sector.
A diversified leader for monthly income
Another stock I’d buy for cash flow is Exchange Income Corporation (TSX: EIF). It pays a $0.22 per share monthly dividend for a 3.4% yield. A $5,000 investment in Exchange would earn $14.08 monthly or $168.96 of annual income.
Exchange Income operates a diversified business with aerospace, aviation, and industrial operations. It provides niche services like emergency medical air transportation to northern Canadian communities. These are places that are hard to get to and require specialized operations.
It has delivered great long-term returns for shareholders. Its stock is up 129% in the past five years and 222% in the past 10 years. Add in dividends, and those returns are 197% and 482%, respectively. It has raised its dividend 17 times in the past 20 years.
A quality real estate stock
If you want to own some real estate assets, you can buy REITs (real estate investment trusts) on the TSX. Dream Industrial REIT (TSX: DIR.UN) is one of the largest industrial landlords in Canada. It also has a large portfolio in Western Europe.
Its properties are characterized by attractive urban locations, high-quality tenants, long-term leases, and attractive occupancy (over 94%). While the dividend has not grown recently, its payout ratio has considerably declined (meaning its dividend is very safe).
It pays a $0.0583 per unit monthly distribution. Dream yields 5.8%. A $5,000 investment would earn $23.33 of monthly cash flow, or $280 annually.
A renewable energy player
Northland Power (TSX: NPI) is another Canadian stock for dividend cash flow. It pays a $0.10-per-share monthly dividend. It yields 4.65%.
Northland operates a diverse portfolio of renewable assets that include onshore and offshore wind, battery power, solar, and utility operations. It has two major projects set for completion next year. That could be a major boost to cash flow (and potentially the dividend).
A $5,000 investment in Northland would earn $19.60 monthly or $235.20 annually.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| Pembina Pipeline | $53.37 | 93 | $0.71 | $66.03 | Quarterly |
| Exchange Income Corporation | $77.46 | 64 | $0.22 | $14.08 | Monthly |
| Dream Industrial REIT | $12.48 | 400 | $0.0583 | $23.33 | Monthly |
| Northland Power | $25.39 | 196 | $0.10 | $19.60 | Monthly |
