MTL:CC - How I'd Invest $500/Month to Target $1784/Year in Passive Income

2023-06-26 11:30:00 ET

Canadians have been squeezed by rising inflation and the most aggressive interest rate-tightening policy from the Bank of Canada (BoC) in over 15 years. In this climate, it is a luxury to have additional income streams that help us keep on top of our obligations. The establishment of a strong and consistent passive-income stream should be considered a milestone for all serious investors. However, most Canadians do not have a large chunk of cash lying around to build a passive-income portfolio overnight.

Today, I want to explore how you can target monthly savings contributions that will help build a super passive-income portfolio.

How much should you save every month to hit our passive-income target?

According to recent data, the median income in Canada is $68,400 after taxes. That mark is bolstered by higher-than-average income rates in provinces like Alberta and Ontario. To be conservative, we will operate under the assumption that the average Canadian salary falls between $50,000 and $65,000.

The “golden rule” of monthly or bi-weekly savings contributions tends to target the 10% mark. So, for a Canadian making $68,400 annually, the expectations are that individual should be able to stash monthly savings of nearly $600. For our hypothetical today, I want to bring that number down to a more manageable $500 per month. Over a five-year period, we will seek to grow our nest egg to $30,000, so we have some cash to play with. Below are two monthly dividend stocks that can help us achieve our goals.

Here are two monthly dividend stocks that can help us generate big passive income

Mullen Group ( TSX:MTL ) is an Alberta-based company that provides a range of trucking and logistics services in Canada and the United States. Shares of this dividend stock have dropped 2.9% month over month as of close on June 22. The stock is still up 4.7% so far in 2023.

Shares of Mullen Group closed at $15.25 on Thursday, June 22. Once we have reached $30,000 after five years of monthly $500 contributions, we can snatch up 800 shares of this stock for $12,200. Mullen Group offers a monthly dividend of $0.06 per share. That represents a solid 4.7% yield. This purchase will allow us to generate monthly passive income of $48.

Slate Grocery REIT ( TSX:SGR.UN ) is a Toronto-based real estate investment trust (REIT) that owns and operates grocery retailers in the United States. Shares of this REIT fell nearly 1% in yesterday’s trading session.

In the first quarter of fiscal 2023, Slate Grocery REIT achieved rental revenue growth of 30% to $50.7 million. Meanwhile, net operating income (NOI) increased 23% to $39.8 million. Moreover, adjusted funds from operations (AFFO) jumped 1.1% to $13.3 million.

This REIT closed at $12.72 on June 22. For our passive-income portfolio, we can snag 1,399 shares of Slate Grocery REIT for a total price of $17,795.28. The REIT offers a monthly dividend of $0.072 per share, which represents a superb 9% yield. This investment means we can churn out monthly passive income of $100.72 going forward.

Bottom line

Canadian investors who commit to a monthly contribution of $500 to their passive-income portfolio will really start to see this strategy pay off in five years’ time. At that point, you will be able to churn out monthly passive income of $148.72 with our $30,000 nest egg. That works out to annual passive income of $1,784.

The post How I’d Invest $500/Month to Target $1,784/Year in Passive Income appeared first on The Motley Fool Canada .

Fool contributor Ambrose O'Callaghan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Mullen Group. The Motley Fool has a disclosure policy .

2023