How to Build a Monthly Paycheque Portfolio With Only 5 Stocks

Canada has some good, stable dividend stocks that can actually help you build a monthly paycheque that grows with inflation. These stocks are for retirees as well as those who plan to retire in the next 10 years. Depending on your needs, you can either compound dividends using a dividend reinvestment plan (DRIP) or take payouts now.

How to build a monthly paycheque portfolio

When we speak of monthly payouts, REITs are the first thing that come to mind. However, they do not grow their dividends as strongly as quarterly dividend stocks. You can construct your portfolio around two monthly payers and three quarterly payers, taking their dividend payment dates into account.

Consider pairing Cenovus Energy (TSX: CVE), Capital Power (TSX: CPX), and Sun Life Financial (TSX: SLF). Their dividend payment dates will ensure a monthly payout.

These three stocks diversify your sector exposure and give different risk exposure to economic situations.

Cenovus Energy

Cenovus Energy is a good stock to fight inflation fueled by oil prices. The company has revived post-pandemic as energy shocks drove up oil prices, helping it reduce debt and strengthen its balance sheet. It is focusing on reducing its net debt from $5.39 billion to $4.08 billion to ensure it can remain profitable and pay dividends even at US$45 WTI.

CVE stock aims to grow its dividend by 10% annually. However, I maintain a conservative estimate of 8% dividend growth for the next 10 years.

Capital Power

Capital Power builds, acquires, operates, and maintains power plants in Canada. It is focusing on upgrading natural gas-fired power plants, as they help increase capacity at a faster rate with a lower cost of US$1,000/kilowatt compared to US$2,500/kilowatt for power plants built from scratch. It has 25 GW of projects in the pipeline, of which 16GW is from mergers and acquisitions.

CPX stock has been paying dividends for the last 16 years and growing them over the last 12 years at an average annual rate of 6%. The increasing capital expenditure from pipeline projects could slow dividend growth in the coming years to 4%.

Sunlife Financial

Sunlife Financial gives you exposure to the global investment and insurance segment. It earns regular income from favourable insurance markets and higher fees for assets under management. The company is sensitive to financial market headwinds. It took a significant hit after the 2008 Global Financial Crisis and has recovered with financial stability. But even after the crisis, it paid dividends and paused growth until business recovered in 2014.

Two monthly dividend stocks

While quarterly dividends offer dividend growth, Slate Grocery REIT (TSX: SGR.UN) and CT REIT (TSX: CRT.UN) offer stable monthly payouts. Slate Grocery manages retail properties in the United States and enjoys high occupancy due to tenants like Kroger and Walmart. The exposure to grocers and essential services provides assured rent that helps it pay dividends. You can consider buying Slate Grocery REIT for its 8% dividend yield and the foreign exchange benefit: dividends are converted from US dollars to Canadian dollars.

As for CT REIT, it increases its dividend by 3% annually and will continue to do so due to its beneficial arrangement with Canadian Tire. The REIT saves on broker commissions and advertising as it primarily acquires and maintains property that Canadian Tire wants.

How to earn monthly payouts from the five stocks

A $15,000 investment in each of the five stocks can help you earn an average of $297.45 per month in dividends. Among the five stocks, three – CT REIT, Capital Power, and Sun Life Financial – offer a DRIP, which can help you compound dividend income if you do not want to take payouts now.