When it comes to picking great investments to generate a passive income, there is no shortage of options on the TSX. If you are serious about starting to invest in the stock market and want to focus on passive income, dividend investing can be a great approach.
When it comes to dividend investing, few investments can rival the blue-chip stocks you can find among Canada’s Big Six Banks. Canada’s biggest bank stocks have been around for over a century and a half, with some nearing two centuries of being around. The companies are well-capitalized and can generate recurring revenue reliably.
Besides delivering solid long-term growth through capital gains, Canadian banks like the Bank of Nova Scotia (TSX:BNS) can be a generous passive income stream for investors with a long-term view.
Why invest in Scotiabank?
Also called Scotiabank, the Bank of Nova Scotia is one of the oldest banks in the country. It might not be the largest or most recognized among the Big Bank Stocks, but it has the most significant international presence among its closest Canadian peers. Scotiabank has significant domestic operations, but it also boasts an increasing amount of revenue from international markets. While not a guarantee, the growth rates in various international markets can be greater than in more mature markets like Canada.
Greater growth in cash flows means that Scotiabank can invest in further expansions and fund growing dividend payouts to investors. In recent years, Scotiabank has shifted its focus away from several developing markets, especially in Latin America. While the markets boast high-growth potential, the bank wants to emphasize a defensive appeal to counter global market volatility.
What about the income?
Scotiabank can be an excellent investment for dividend-seeking Canadians. The company has paid quarterly dividends without fail for over 190 years. It means that the bank has paid investors through two World Wars, several health crises, and multiple global economic downturns. Investing $1,000 per month can help you build up your holdings in the stock to turn its quarterly dividends into a substantial amount in passive income. Buying and holding its shares in a Tax-Free Savings Account (TFSA) means you can enjoy the dividends without incurring taxes on it.
Foolish takeaway
Let’s take the recent share price of Scotiabank stock at $100.17, and how investing $1,000 per month will translate its $1.10 in quarterly dividends ($4.40 annually) into annual income, after reaching a total of $12,000 invested in the stock over 12 months.
| Month | Investment | Total Invested in Stock |
| January | $1,000 | $1,000 |
| February | $1,000 | $2,000 |
| March | $1,000 | $3,000 |
| April | $1,000 | $4,000 |
| May | $1,000 | $5,000 |
| June | $1,000 | $6,000 |
| July | $1,000 | $7,000 |
| August | $1,000 | $8,000 |
| September | $1,000 | $9,000 |
| October | $1,000 | $10,000 |
| November | $1,000 | $11,000 |
| December | $1,000 | $12,000 |
| Total Annual Payout | $523.60 | |
