3 Stocks to Create a $1,000 Monthly Income Stream
The Motley Fool
Published May 15, 2019 07:16
Updated May 15, 2019 07:36
Creating your own passive income stream is one of the greatest ways to gain more flexibility and freedom in life.
While many people are focused on creating an income stream big enough to support their entire life, supplemental income streams can also have great value, providing you regular capital to invest and supporting your needs in times of distress.
It only takes a handful of stocks to create a reliable monthly income stream of $1,000 or more. You’ll need some starting capital, but nothing close to what most people envision they’ll need.
Dividend stocks with upside Most income investors are shuffled into dividend stocks. There’s good reason for this, but not all dividend stocks are alike.
While many people are enamored with dividend yields of 10% or more, these stocks often offer little to no growth. In many situations, the investors receive the hefty dividend, but take capital losses to compensate.
In reality, your nest egg could wither with these “opportunities.”
Instead, focus on stocks that can give you both income and growth opportunities, even if that means sacrificing a bit of yield. This way, your income stream will actually grow over time, or at least keep up with inflation.
Here are your picks Which stocks are good candidates?
In order to create a reliable income stream, you’ll want to focus on dividend growth stocks with resilient business models that can weather periods of distress without cutting their payouts.
You’ll also want to pick stocks that can offset each other’s volatility. So, when one stock goes left, another goes right, keeping your portfolio steady and consistent.
An equal weighting of Bank of Nova Scotia (TSX:BNS)(NYSE:BNS), Hydro One Ltd (TSX:ENB) (NYSE:ENB) would fit these characteristics perfectly.
Take Bank of Nova Scotia, for example, which currently has a respectable 4.8% dividend yield. The stock has also grown in value by more than 10% per year since 1995, meaning that your income stream would have risen in suit.
Most notably, the stock price was hit in 2008 along with every other financial stock. In total, shares fell by up to 50%. The dividend payout, however, remained intact, meaning your income stream would have remained stable.
Hydro One and Enbridge have similar abilities to deliver sustainable dividends with stock price growth. Hydro One currently offers a 4.4% dividend while Enbridge sports a 6% yield. Both companies anticipate growing this payout over the next few years and beyond.
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How to generate $1,000 monthly income How much do you need to create a $1,000 monthly income?
If you took an equal weighting in each stock mentioned, your weighted dividend yield would be roughly 5.1%.
If you wanted a $1,000 monthly income stream immediately, you would need $19,607.
If you started with that amount, however, expect your monthly income to increase over time. With both capital appreciation and dividend growth, your $1,000 monthly income could reach $2,000 within five years.
If you don’t have $19,607 to invest, you can work your way towards a $1,000 income stream with the same stocks.
If you invested $10,000, for example, you’d immediately qualify for the equivalent of $510 in monthly income. If you reinvest the dividends and accrue capital gains, your income stream could hit $1,000 per month in a few short years.
What you do with the money is up to you, but with Enbridge, Bank of Nova Scotia, and Hydro One, creating your own passive income stream is within reach.
The Motley Fool owns shares of Enbridge. Fool contributor Ryan Vanzo has no position in any stocks mentioned. Bank of Nova Scotia and Enbridge are recommendations of Stock Advisor Canada.
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This Article Was First Published on The Motley Fool
Written By: The Motley Fool
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