Building a dividend income stream is one of the main goals for income investors. And building one that can provide $500 per month can make a huge difference in a monthly budget or provide an ample bump to retirement income.
The issue is finding the right stocks to make that dividend income stream a reality and building that portfolio out over time.
Fortunately, there’s no shortage of options on the market. Here’s a look at three options to consider and what it would take to get to that $500 a month milestone.
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Start the dividend income stream with SmartCentres
Investors increasingly turn to Canada’s REITs for a source of recurring income. And in the case of SmartCentres (TSX: SRU.UN), investors are getting a REIT that offers one of the higher yields on the market.
SmartCentres owns a large portfolio of retail properties that are located across metro markets in Canada. Many of those properties are necessity-based retail anchored by some of the largest and best-known names on the market.
That results in SmartCentres drawing in a recurring flow of customers to its properties, which helps the REIT support its monthly distribution. In the most recent quarterly update, SmartCentres reported in-place and committed occupancy levels of 98.1%, reflecting that strong demand.
In terms of a distribution, SmartCentres offers a monthly payout, which, as of the time of writing, works out to a yield of 6.8%. For an investor looking to build a $500 per month income stream, that’s a powerful addition to any portfolio.
Add some industrial exposure with Granite
Another REIT that can help investors to build that dividend income stream is Granite Real Estate (TSX: GRT.UN). Granite is an industrial REIT that owns a mix of logistics and warehouse properties across both North America and Europe.
In the most recent quarter, Granite reported a 98% occupancy rate. The REIT’s AFFO payout ratio for the quarter also came in at 70%, leaving room for that monthly distribution.
As of the time of writing, Granite offers a 4.2% yield and provides investors with exposure to a less obvious, yet increasingly important component of the economy.
Include some banking exposure
No review of stocks that provide a dividend income stream would be complete without mentioning at least one of Canada’s big bank stocks. Today, that bank stock to consider is Bank of Nova Scotia (TSX: BNS).
Scotiabank isn’t the largest of the big banks, but it is the most international. The company has a presence in over 20 markets around the world, which provides both additional revenue streams and a source of diversification.
In the most recent quarter, Scotiabank reported adjusted diluted earnings of $2.28 per share, compared with $1.88 in the prior year.
The bank has paid dividends for well over a century without fail, and as of the time of writing, offers a yield of 3.5%. Unlike the other two stocks mentioned above, Scotiabank pays out its dividends on a quarterly cadence.
Assembling the dividend income stream
With $140,000 allocated across these three holdings, a portfolio could generate more than $500 per month. Here’s how that allocation works:
| Company | Recent Price | Total Invested | No. Of Shares | Annual Dividend | Annual Income | Frequency |
| SmartCentres REIT | $27.00 | $45,000 | 1,666 | $1.85 | $3,082.10 | Monthly |
| Granite REIT | $84.46 | $45,000 | 532 | $3.55 | $1,888.60 | Monthly |
| Bank of Nova Scotia | $131.86 | $50,000 | 379 | $4.56 | $1,728.24 | Quarterly |
| Total: | 6,698.94 | Monthly: | $558.25 |
Note that prospective investors who cannot yet hit that $500 per month milestone can begin with smaller positions and reinvest their payouts to build those holdings over time.
