PPL:CC - $30000 to Freedom: Crafting a Strong Passive-Income Portfolio
2024-02-05 16:50:00 ET
How much can stock investments grow? A stock is a financial instrument whose value grows over time. However, the TSX has only two cycles: bull and bear markets. If you want to ride out the highs and lows and realize healthy returns, the advice is to invest for the long term.
Long-term investing is a proven strategy to compound earnings or investment income from dividend stocks. It’s also the best approach to building a dividend stock portfolio that generates passive-income streams regularly.
Path to financial freedom
Based on the Rule of 72 formula, divide 72 by the rate of return to estimate how long your money will double. Thus, $1,000 will double in 36 years on a 2% rate of return. However, assume you have $30,000 and intend to craft a strong passive-income portfolio.
Invest in Bank of Montreal ( TSX:BMO ) and Pembina Pipeline ( TSX:PPL ) to grow your money to $60,316.12, including dividend reinvestment, in fewer than 14 years. At their current dividend yields, you’ll generate $788.63 in quarterly passive income from a $15,000 position in each stock.
Top pick
BMO is a no-brainer choice for income investors. At $126.02 per share, the dividend offer is 4.77%. While the dividend yield isn’t the highest in the market, BMO is the TSX’s dividend pioneer.
The $90.85 billion bank started paying dividends in 1829. Its dividend track record is only six years short of 200 years. Furthermore, the big bank stock has increased its dividend yearly since 2009. Given the lengthy payout history, you’d be panic-proof for decades.
Canada’s oldest lender is now the 13th-largest bank in the U.S. by consolidated assets and the eighth largest in North America. BMO’s footprint across the border expanded to 32 states after acquiring the Bank of the West on February 1, 2023.
Low-risk business model
Pembina Pipeline is a top-tier investment in the oil & gas midstream industry owing to its diverse, integrated assets and long-term, fee-for-service contracts. The business model is low risk and delivers resilient, growing cash flow. At $46.15 per share, the large-cap energy stock pays a juicy 5.79% dividend.
The $25.35 billion energy infrastructure company will soon strengthen and cement its position in core natural gas liquids (NGL) and renewable natural gas (RGL) markets. Management announced a transaction in December 2023 that should boost Pembina’s growth and profitability in the coming years.
Acquiring Enbridge’s remaining interests in the Alliance Pipeline, Aux Sable, and NRGreen joint ventures is a strategic move. “This transaction is a significant step towards achieving Pembina’s long-term growth strategy,” said Scott Smith, Pembina’s president and chief executive officer. The $3.1 billion deal will close in the first half of 2024.
Turning point for stocks
BMO Wealth believes 2024 is a turning point for stocks as inflation pressures ease and borrowing costs decline. The group maintains a constructive investment outlook because financial conditions should return to normal soon.
Now is the best time for investors to build a passive-income portfolio. With BMO and Pembina Pipeline as anchor stocks, you’d be on the road to financial freedom.
The post $30,000 to Freedom: Crafting a Strong Passive-Income Portfolio appeared first on The Motley Fool Canada .
Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool recommends Enbridge and Pembina Pipeline. The Motley Fool has a disclosure policy .
2024