Yahoo Finance How I’d Invest $1,000 in April to Make Easy Passive Income
Written by Puja Tayal at The Motley Fool Canada
Are you building a passive-income portfolio by investing $1,000/month in dividend stocks? What yield are you looking to achieve from your portfolio: 5%, 6%, or 7%? A 6% yield can convert a $1,000 monthly investment into $800 monthly passive income in 10 years if you reinvest your dividend income. In your journey to make easy passive income, here is how you can make the most of the $1,000 investment and lock in a 7% yield.
How to invest $1,000 in April 2023
This month saw a recovery in the TSX after the U.S. banking crisis pulled down real estate, energy, and bank stocks in March. While some TSX stocks recovered completely, three are still halfway through the recovery, creating an opportunity to buy them near their lows.
Stocks | Stock Price | Dividend Per Share (Annual) | Amount Invested | No. of Shares | Annual Dividend |
TNT.UN | $3.4 | $0.297 | $312.8 | 92 | $27.3 |
TRP | $56.0 | $3.720 | $336.0 | 6 | $22.3 |
BNS | $68.8 | $4.120 | $343.75 | 5 | $20.60 |
Invest in REIT
True North Commercial REIT (TNT.UN) stock fell 40% in mid-March after the real estate investment trust (REIT) slashed its distribution by 50%. Before the distribution cut, its yield was above 8%, and the payout ratio was over 100%. Its yield is still above 8% after the cut but the payout ratio will probably fall below 70%, as the REIT expects its rent income to fall.
Some of the REIT’s tenants are vacating or downsizing their space requirements amid weak macroeconomic conditions. The REIT has halved its distributions to keep them in check with the rental income and has sufficient money to pay mortgages.
The current crisis has made the REIT stock available at a throwaway price. You can buy 92 True North Commercial REIT shares for $313 and earn an annual passive income of $27.3.
But this stock can offer you more than passive income. It has bottomed out, and the only way it can go is up. As the economy recovers, property prices will grow as more companies look for an office. The REIT can see its occupancy rate improve and rental income increase. Although I don’t expect it to increase its distribution anytime soon, the recovery could boost the stock price by 20-30%, giving you capital appreciation.
Invest in bank stocks
Returning to our passive-income portfolio, diversify your investments across different sectors. Taking a contrarian approach, this is the time to invest in large bank stocks that have a strong balance sheet to withstand a recession. Bank of Nova Scotia (TSX:BNS) is among the Big Six banks and has been paying a dividend since 1833.
Scotiabank has expanded beyond Canada into Pacific Alliance (Mexico, Chile, Peru, and Columbia) for higher growth and returns. However, its exposure to the United States is minimal at 6.9%. The stock fell in February and March but has not yet recovered completely, creating an opportunity to lock in close to a 6% yield. The bank has a history of growing dividends, which could boost your passive-income portfolio.
You can buy five shares of Scotiabank for $344 and secure an annual passive income of $20.6. This passive income could grow as and when the bank increases dividends. For instance, five Scotiabank shares would have fetched you $16.4 in annual passive income in 2018. In five years, this income has grown to $20.6.
Energy stocks
You can invest the remaining amount to buy six shares of TC Energy (TSX:TRP) and lock in a 6.65% yield. Like BNS, TC Energy also grows dividends annually. The stock fell 15% since December 2022 after a major oil leak in the Keystone Pipeline. The pipeline company is also seeing ballooning costs for its Coastal GasLink pipeline project. The project will open Canada’s liquefied natural gas (LNG) to the world. Once this pipeline comes online, it will start contributing to the cash flows and ease the pressure on TC Energy.
In the worst-case scenario, TC Energy might pause its dividend growth but is unlikely to cut it, as the current dividend comes from existing projects earning toll money.
Investing tip
The above three stocks can help you earn $70 in annual passive income on a $1,000 investment in April. You can lock in a 7% yield and a chance of growing this dividend every year.
The post How I’d Invest $1,000 in April to Make Easy Passive Income appeared first on The Motley Fool Canada.
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Fool contributor Puja Tayal has no position in any of the stocks mentioned. The Motley Fool recommends Bank Of Nova Scotia. The Motley Fool has a disclosure policy.
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