Have you ever wondered how much income you could generate with $250,000 fully invested in stocks?
The amount, of course, varies depending on how you invest, but it could be substantial.
While the conventional wisdom is that it takes over $1 million to retire on investment income in Canada, you could still make a significant dent in your expenses with a $250,000 dividend stock portfolio.
Indeed, in a good year, your total returns (dividends and capital gains combined) could even be enough to cover all your annual expenses! That’s not to say you should attempt to retire with just $250,000 in the bank. But it is a powerful illustration of what’s possible with stocks. In this article, I’ll explore how much you could earn monthly with dividend stocks/funds.
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Aggressively invested: Over $14,000 (with substantial risk)
If you buy a carefully chosen portfolio of high-dividend stocks, you could get over $14,000 per year in dividend income. That would require a 5% yield, which is definitely available in the Canadian large-cap universe. The caveat is that the risk you’d assume here would be greater than that which you’d assume investing in index funds. High-yield stocks often face risks related to dividend sustainability, while individual stock picking in general is riskier than diversified investing unless you have a major information edge. So, you’re more likely to lose it all shooting for very high amounts of monthly dividends, all else the same.
As for stocks that could make the above numbers work, Enbridge (TSX: ENB) appears to be one that would go even further. It’s a pipeline stock that has a 5.86% yield at today’s price. Consistent with the above paragraph, this is a relatively “risky” yield: Enbridge’s payout ratio (percentage of earnings paid as dividends) is over 5%.
In the table below you can see the math on how much annual dividends you could get with Enbridge stock. As you can see, it’s a pretty substantial amount—though, of course, going all in on one stock is a very risky thing to do.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| Enbridge | $66.21 | 3,776 | $0.97 per quarter ($3.88 per year) | $3,662 per quarter ($14,650 per year) | Quarterly |
Defensively invested: +$7,000
As we’ve seen, it is definitely possible to get +$14,000 per month with individual high-yield dividend stocks, or a concentrated portfolio of such stocks. The downside here is that this strategy is very risky unless you possess unusual, hard-to-find knowledge about the companies you’re investing in. As an amateur, you’re better off diversifying.
You can diversify widely and easily with a fund like Vanguard FTSE Canadian High Yield Index ETF (TSX: VDY). It’s an ETF of Canadian high-yield dividend stocks, which in practice means stocks that yield slightly more than the index does. The fund is a true index ETF, tracking the FTSE Canadian High Yield Index, so it’s not a collection of hand-picked stocks designed to have as much yield as possible. It does, however, have a higher yield than the TSX Composite Index, and it pays dividends monthly instead of quarterly. It could pay you about $613 every month.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| VDY ETF | $75.79 | 3,299 | $0.186 per month ($2.32 per year) | $613.61 per month ($7,363 per year) | Monthly |
Foolish takeaway
As you can see, you can get between $7,000 and $14,500 per year from a $250,000 Canadian dividend stock portfolio. On a monthly basis, the range is $613 to $1,208 per month. That’s not quite enough to pay all your bills in retirement, but it is definitely enough to make a difference.
