One of the biggest questions asked by existing and future income investors is whether they can really live off dividends. At its core, that’s a great idea, having investments that cover all of your bills and your existing lifestyle.
But is it really possible for most investors? Could you really live off dividends?
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You can live off dividends, but you need a lot more invested
The short answer to that question is yes, you can live off dividends. The longer answer is that you can, but you’ll need more than you think, and it will take time to get to that point.
Let’s put an example to the test.
Assume that you need $5,000 every month to cover your bills. That’s $60,000 each year. If we use a 4% yield, that will mean a portfolio of $1.5 million. If we set a lower bar, like $3,000 per month with a higher, 5% yield, that works out to a portfolio of $720,000.
This leaves us with two questions. What investments can make that happen, and how long will it take? Here are a few options to help answer the first part, while the latter part depends on how much you can contribute over time.
Scotiabank provides dividend income
It’s hard to mention the idea of being able to live off dividends and not mention one of the big bank stocks. Today, that bank is Bank of Nova Scotia (TSX: BNS).
Scotiabank is the most international of the big banks, with exposure to both Canada and 20 markets abroad. The bank’s lending and financial services businesses generate a diversified base of earnings that lets the bank pay its quarterly dividend.
As of the time of writing, Scotiabank offers a yield of 3.6%. The bank has paid that dividend for well over a century and has provided increases to that dividend over the years.
For investors looking to live off dividends, a $200,000 investment in Scotiabank will generate about $600 every month, although it pays quarterly.
Canadian Utilities brings in dividend growth
When building an income portfolio, investors often focus on the yield. While that is important, dividend growth is equally important to consider. That’s where Canadian Utilities (TSX: CU) enters the conversation as the second pick in our income portfolio.
Canadian Utilities is one of the larger utilities in Canada. The company offers utility service in parts of Canada, Australia and Puerto Rico.
Utilities provide a more predictable revenue stream, owing to the sheer necessity of the service they offer. This means that Canadian Utilities can predictably forecast increases to its dividend and plan for growth investments.
Those increases are a major part of the appeal of Canadian Utilities. The company currently has the longest dividend growth streak in Canada, at 54 years. That includes a 1% increase for 2026.
As of the time of writing, Canadian Utilities offers a quarterly dividend that pays a yield of 3.7%. A similar $200,000 investment here would generate approximately $620 a month on average, paid quarterly.
ZWC boosts monthly cash flow
Rounding out the three investments in our income portfolio is an ETF. More specifically, a covered-call ETF that comes in the form of BMO Canadian High Dividend Covered Call ETF (TSX: ZWC).
The ETF invests in Canadian dividend-paying stocks and then uses covered calls to generate additional cash flow. Selling those options brings in premiums, while limiting some upside on the positions covered by the contracts.
This helps the fund offer a higher distribution yield, which as of the time of writing, works out to 6.1%. This means that our $200,000 investment will bring in just over $1,000 every month.
That payment alone could cover several recurring monthly expenses.
Can you live off dividends with this income?
Across all three of the investments mentioned above, there’s a blended yield of 4.5%. Together, the three $200,000 investments will generate just over $2,200 a month, which is below either income target.
What they do offer is something important that answers the second question mentioned above about how long it will take.
Building a portfolio with a goal of living off dividends will take time, even decades. The investments above show how that can work, but you still need contributions to make that happen.
Regular contributions and reinvested dividends can help build that portfolio until you need the income.
