Invest $50,000 in This Dividend Stock for $2,580 in Passive Income

Brookfield Renewable Partners (TSX:BEP.UN) can add considerable passive income to your portfolio.

Andrew Button

Author Bio

Andrew “A.J.” Button is a financial writer with a longstanding interest in value investing and international markets. He began investing at a young age, building a portfolio of dividend stocks to help pay for university. After stepping away from investing for a time, he rediscovered his passion in 2019 when he began working as a freelance financial writer. Since then, Andrew has built a diversified investment approach spanning Canadian, U.S., and international equities, as well as guaranteed investment certificates (GICs) and money market funds. He is particularly interested in international stocks, drawn to their dividend potential and long-term growth opportunities, while maintaining an interest in Canadian businesses. Before joining The Motley Fool, Andrew worked as a freelance copywriter specializing in financial services. He continues to write for financial publications and share his thoughts on stocks through social media.

Education and Professional Credentials

Canadian Securities Course (CSC)
CFA Program Level I examination completed

Areas of Expertise

Value investing, Canadian equities, U.S. stocks, international equities, dividend investing, long-term investing, GICs, money market funds, and portfolio diversification.

Social Media Profiles

Published March 17, 4:50 pm EDT

Do you want to get a considerable amount of passive income coming in with relatively little invested?

If so, you should go with dividend stocks.

Government bonds have almost no yield these days, and corporate bonds are barely better. Real estate, meanwhile, is not truly passive, as it entails a lot of maintenance and repair work.

Dividend stocks are the way to go. To illustrate that point, here’s a dividend stock that could net you $2,580 per year in passive income with just $50,000 invested.

top TSX stocks to buy — Source: Getty Images

Brookfield Renewable

Brookfield Renewable Partners (TSX: BEPC)(TSX: BEP.UN) is a Canadian renewable energy company. It sells power on the open market, mainly to companies like utilities, major corporations, and increasingly, tech companies. The company sources power from a variety of sources, most notably wind, hydro and solar. It also has investments in nuclear energy through Westinghouse, of which it owns 50%.

Income potential

Brookfield Renewable has a pretty high dividend yield. Its distribution is $0.535 per quarter, or $2.14 per year. Its stock price is $41.47. 2.14 divided by 41.47 is 0.0516, or 5.16%. So, when you invest $50,000 into Brookfield Renewable Partners, you should get $2,580 back in annual passive income. Here’s how the math on that works.

COMPANY	RECENT PRICE	NUMBER OF SHARES	DIVIDEND	TOTAL PAYOUT	FREQUENCY
Brookfield Renewable	$41.47	1,205	$0.535 per quarter ($2.14 per year)	$644.675 per quarter (roughly $2,580 per year)	Quarterly

As you can see, Brookfield Renewable will generate considerable income if its dividend is maintained or increased. Will it be? In the next section, I will explore the company’s future prospects to see whether that’s the case.

An incredible set of projects

We can gauge Brookfield Renewable’s future dividend potential by looking at its project pipeline. This tells us how much growth the company has in store. The company’s earnings growth, in turn, can power its dividend growth.

Here are Brookfield Renewable’s biggest projects today:

An ongoing agreement to supply 10.5 gigawatts of clean power to Microsoft.
A similar deal to supply three gigawatts to Alphabet.
Westinghouse’s plan to build 10 nuclear power plants in the United States (this one is not confirmed).

Together, these developments make the case that Brookfield Renewable has a good future ahead of it. In the next section, we’ll see whether the company’s financials back that claim up.

Financials

When it comes to growth, Brookfield Renewable has given a mixed showing in recent years. Its revenue has grown consistently, up 9% in the trailing 12-month period and more over longer timeframes. However, its earnings are down in the same 12-month period. The company’s earnings have compounded at an impressive 24% compound annual growth rate over 10 years, but the last few years have been a little disappointing. Its margins include a 55% gross margin, a 51% EBITDA margin and a 13% EBIT margin. These metrics indicate that Brookfield Renewable Partners is fairly profitable.

The bottom line

The bottom line on passive income is that you need to pick your source carefully. Invest well in dividend stocks, and you can live comfortably for life. Go with lesser passive-income sources, and you could end up struggling. Brookfield Renewable appears to be a solid bet today.