Canadian investors may have a hard time creating a passive-income stream right away. Many of us don’t have all that much cash to begin with and so decide that dividend stocks simply aren’t for us.
The problem with this is that you can end up deciding to take on high-risk growth stocks hoping for large returns. This option is quite volatile — especially during a market correction like the one we’re experiencing today.
Instead, I would recommend stability through passive-income stocks. Even if those stocks don’t offer a huge amount of increase in dividends. That’s because they still offer stability. Today, I’m going to look at how with just $500, you can turn $32 in passive income into $382.
First, the stock
If you’re going to invest in a passive-income stock, you want the right one. That means one that offers a valuable share price to see strong returns coupled with stable dividends. This would be what you get from NorthWest Healthcare Property Units REIT (TSX:NWH.UN).
NorthWest is a healthcare real estate investment trust (REIT) that owns healthcare-related properties around the world. The company offers diversification through a few ways. First of all, it invests in different properties like office spaces, hospitals, and even parking garages. Then it operates around the globe. That way, you get a diverse set of revenue streams to pick up the slack when others are down.
Luckily, the company hasn’t really had that problem. During its latest earnings report, revenue and net asset value continued to climb. Further, it had an average lease agreement of 14.6 years. On top of that, its long-term contracts with hospitals and other healthcare properties average agreements at 17.1 years. That’s almost two decades of stable rent!
Now, for the passive income
If you’re a Motley Fool investor looking for a valuable passive-income stock, this one has you covered. You can already count on the long-term funds coming in. It also offers a stable dividend yield of 6.57%.
I use the word stable for a reason. The company hasn’t grown its dividend since coming on the market. And while that might not be ideal, it hasn’t dropped either. That’s despite going through today’s market correction and the incredible uncertainty of the pandemic.
Instead, you get access to a dividend that will remain at least at the $0.80-per-year-per-share range — all while shares continue to climb, up 16% in the last five years. It offers a discount today after dropping during the market correction, down 10% year to date and trading at 6.2 times earnings.
Making that passive income
So, let’s say you have $500 to invest towards NorthWest stock today. That would bring in annual passive income of $32. Next, let’s say you can afford to continue putting aside just $500 each year towards this company. You continue to see shares climb at their historical rate of just 7.12% per year. You then reinvest your passive income and let your returns grow.
To create $380 in passive income, it would take you just a decade to get your shares to create that much! Furthermore, at historical rates, you should then have a portfolio worth $10,298! You’ve therefore increased your portfolio by 1,959% in just a decade.
