NOTE: This post does not indicate a recommendation to purchase any of these stocks, it does not represent an investment recommendation and contains no analysis of risk or of soundness of the underlying business. The post is strictly representative of options for generating $500 in annual passive income through dividend income.
Your Investment Portfolio and Dividend Income
A popular source for passive income is investment or portfolio income.
The income opportunity is generated from both: 1. potential growth in the value of an investment; and, 2. from dividend income.
Stability in dividend income depends on the health of the underlying business and economic conditions. This year many corporations have cut dividend payments.
Dividend Income Considerations
When buying dividend stock, top considerations would include: stock price, health of the underlying business, and history of dividend payments.
An increase in Dividend yield can indicate an increase in risk of not only future dividend payments but risk of losing your initial investment (capital).
Depending on your preferences you may invest only in dividend paying stocks. Additionally, you may have personal preferences that would exclude some of these examples because of what the company does or the services it provides.
I would refer to these preferences as your investment policy. And, when your passive income is your primary source of income, I recommend having a documented investment policy to guide your investment decisions.
Dividend Stock Comments
As you look through these examples you will see a significant variation in the capital investment required to generate the $500 annual dividend income. The first company requires the lowest capital investment to generate $500 in dividend income. Interestingly, it could, potentially, represent the highest risk in loss of capital.
There is work involved in evaluating company and stock performance.
Investors can invest in Dividend Exchange Traded Funds (ETF) instead of investing directly in individual stocks. An ETF can provide diversification of your capital investment to provide some protection against loss of dividend income.
Whether you invest directly in individual stocks or invest in an ETF, reinvesting your dividend income will compound returns on your capital investment.
Dividend Stock Examples
The following 5 stock examples that could generate $500 per year in passive income. Values are calculated using current share price and forward dividend payment:
Enbridge Inc. (ENB)
$31.35 per share
$2.48 per share annual dividend (forward)
202 Shares Required for a total capital investment of $6,332.70.
7.9% annual return on investment for $500.96 in dividend income in one year of holding. (projected)
Would holding 202 shares of this company have net $500 in dividend payments in the past 12 months? No, actual dividend payments for the past 12 months total 2.35/share for a 12-month total of $475.31 paid.
Toronto-Dominion Bank (TD)
$48.08 per share
$2.40 per share annual dividend
209 Shares Required for a total capital investment of $10,048.72
4.98% annual return on investment for $501.60 in dividend income in one year of holding.
Would holding 209 shares of this company have net $500 in dividend payments in the past 12 months? No, actual dividend payments for the past 12 months total 2.27/share for a 12-month total of $475.06 paid.
U.S. Bancorp (USB)
$36.08 per share
$1.68 per share annual dividend (forward)
298 Shares Required for a total capital investment of $10,751.84
4.65% annual return on investment for $500.64 in dividend income in one year of holding. (projected)
Would holding 298 shares of this company have net $500 in dividend payments in the past 12 months? Yes, actual dividend payments for the past 12 months total 1.68/share for a 12-month total of $500.64 paid.
Sunlife Financial (SLF)
$41.56 per share
$1.67 per share annual dividend (forward)
300 Shares Required for a total capital investment of $12,468.
4.01% annual return on investment for $501 in dividend income in one year of holding. (projected)
Would holding 300 shares of this company have net $500 in dividend payments in the past 12 months? Yes, actual dividend payments for the past 12 months total 1.79/share for a 12-month total of $537.30 paid.
Costco Wholesale Corporation (COST)
$341.07 per share
$2.80 per share annual dividend (forward)
179 Shares Required for a total investment of $61,051.53.
0.819% annual return on investment for $501.20 in dividend income in one year of holding. (projected)
Would holding 179 shares of this company have net $500 in dividend payments in the past 12 months? No, actual dividend payments for the past 12 months total 2.70/share for a 12-month total of $483.30 paid.
I hold one of the four stocks mentioned above that passed my screening (investment policy). I purchased it when it was ‘on sale’. And, I regularly check the health of the underlying business so I can protect against loss of my capital investment.
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