How Splitting $30,000 Across 3 Stocks Could Generate $1,350 in Annual Passive Income

Do you want to get a thousand or two in extra passive income from investments?

If so, it pays to invest in dividend stocks.

These days, bonds don’t pay much (a typical GIC yields 2.75% per year), while savings account interest is near-zero, even if your balance is high.

So, there is not much you can do to generate passive income with “risk-free” or insured assets.

You can, however, still get substantial income coming in with dividend stocks. Despite the big gains in the market over the last few years, there remain Canadian dividend stocks with substantial yields. They can be found primarily in the energy, utilities, and financial sectors. With a diversified portfolio of such stocks yielding 4.5%, you can get $1,350 per year in annual passive income with as little as $30,000 invested. In this article, I will explain how that can be done.

How to get to $1,350 with $30,000 invested

If you invest $30,000 at a 4.5% yield, you get $1,350 back in annual passive income. Over time, that can add up to a substantial amount of money. While it’s not reasonable to put all of your money into just one stock that has exactly a 4.5% yield, you can get similar results at lower risk with multiple stocks whose yields average to about 4.5%.

We can illustrate this through two stocks: Enbridge Inc (TSX: ENB) and Bank of Nova Scotia (TSX: BNS). Enbridge has a 5% yield and BNS has a 4% yield. Together, they can produce roughly $1,350 in annual passive income with $30,000 invested.

Let’s start with Enbridge. It’s a Canadian pipeline company that ships crude oil all over North America. It is also a natural gas utility, supplying about 75% of Ontario’s natural gas power. The company’s established infrastructure gives it a moat, an advantage that competitors can’t replicate, at least not without spending hundreds of billions of dollars – sums that are difficult to obtain. Thanks to its “toll bridge” like business model, Enbridge generates a lot of income that it can pass on to its investors.

Enbridge paid $3.80 in annual dividends and had a $77.23 stock price at the time of this writing. This means the stock has a 4.9% yield. If you invest $15,000 in Enbridge, you get close to $738 back in annual passive income, as the chart below shows.

Next up, we have Bank of Nova Scotia. This is a Canadian bank that is well known for its geographically diversified operations. The bank has operations all over the world – Canada, Asia, Latin America, you name it. This geographical diversification gives BNS the ability to thrive even when the Canadian economy is not going great. The stock pays $4.56 in annual dividends while having a $113.01 stock price, giving it a 4.035% dividend yield. Invest $15,000 in it, and you’ll get about $605 back in annual passive income if the dividend doesn’t change.

So, in this hypothetical portfolio, we get $738 worth of dividends coming from Enbridge and $606.48 worth coming from BNS, with just $30,000 invested. The amounts sum to $1,344 per year. Not a bad dividend yield for a starter portfolio worth just $30,000.