Need $500 in Passive Income Each Month? These 2 TSX Stocks Are Your Top Bets 

Are you looking for $500 in monthly passive income? These TSX stocks offering a 5% dividend yield are good bets.

| More on:

Wouldn’t it be nice if you had two fewer things to worry about every month? So, your mortgage payments are increasing as your fixed-interest contract renews with a higher interest rate. Canada has not had a 4.5% interest rate since 2007. Accommodating utility bills and groceries with a higher mortgage leaves you with little money for discretionary spending. At times like these, you feel a $300–$500 monthly passive income would make life easy. Don’t let this thought be in vain. The struggles of today are the comforts of tomorrow. 

How to convert a $500 investment into a $500 passive income 

If you invest $500/month in stocks that offer more than a 5% dividend yield and reinvest the dividend, you can earn $500 in monthly passive income in 16 years. Here’s how.

YearContributionDividends @5%Total Amount
2023$6,000.0 $6,000.0
2024$6,000.0$300.0$12,300.0
2025$6,000.0$615.0$18,915.0
2026$6,000.0$945.8$25,860.8
2027$6,000.0$1,293.0$33,153.8
2028$6,000.0$1,657.7$40,811.5
2029$6,000.0$2,040.6$48,852.1
2030$6,000.0$2,442.6$57,294.7
2031$6,000.0$2,864.7$66,159.4
2032$6,000.0$3,308.0$75,467.4
2033$6,000.0$3,773.4$85,240.7
2034$6,000.0$4,262.0$95,502.8
2035$6,000.0$4,775.1$106,277.9
2036$6,000.0$5,313.9$117,591.8
2037 $5,879.6$123,471.4
2038 $6,173.6 
Invest $500/month to get $500/month in passive income 

A $500 monthly investment converts to a $6,000 annual income. You will receive the first full-year 5% dividend of $300 on your 2023 investment in 2024. Next year, you will invest another $6,000 plus reinvest the $300 dividend income, bringing your total investment to $12,300. After 14 years of repeating this, you will accumulate a portfolio of $117,592, of which your invested amount is $84,000. 

This dividend reinvestment adds $39,500 to your portfolio in 16 years. After 16 years, you can decide to reinvest or start collecting your $500 in monthly passive income. 

2 TSX stocks for your $500 monthly passive income goal

The first thing that comes to mind when you think of passive income is safe dividend aristocrats that have been paying dividends for decades. You probably even have a good amount invested in such stocks. But it is important to diversify your portfolio across some mid- and small-cap stocks. They are risky and relatively new. But they have the potential to grow dividends and their stock price, enhancing your portfolio value in the long term. 

For April 2023, you can lock in a 5% annual dividend yield with these two mid-cap stocks. 

RioCan REIT 

The rising interest rate has pulled down property prices, sending real estate stocks on a downtrend. Some commercial REITs even slashed their distributions to keep up with falling occupancy rates. These challenging times have pulled down RioCan REIT’s (TSX:REI.UN) stock price by 17% since the rate hike began and inflated the distribution yield to 5.06%. While many retail REITs offer a higher yield, I choose RioCan because its 2020 distribution cuts reduced its payout ratio to a safe zone of 59%. Other REITs have a payout ratio above 70%. 

Moreover, RioCan can withstand a significant dip in property prices as most of its properties are based in the top six densely populated cities that have a higher average household income. It has three things working in its favour: prime location, high credit ranking tenant base, and lower payout ratio. If you invest in RioCan while it trades between $20.50 and $21.50, you can lock in a 5% annual yield distributed over 12 monthly instalments.

Rogers Sugar stock

Rogers Sugar (TSX:RSI) gives you a good option to diversify your dividend portfolio into the consumer staples sector, which is resilient to macroeconomic crises. The company enjoyed strong revenue last year due to operational issues at a competitor. But it did not grow dividends as it did not expect the growth to sustain. Favourably, higher sugar prices offset increased expenses due to inflation. If you buy this stock between $5.50 and $6.50, you can lock in a 5.5% dividend yield. 

Investing tip 

A $3,000 investment can buy you 139 shares of RioCan at $21.50/share in 2023 and earn you $141.60 in annual passive income in 2024. A similar investment can buy 461 shares of Rogers Sugar at $6.50/share and give $166 in annual passive income. Together, they can earn you $307 in passive income in 2024.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Puja Tayal has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Paper Canadian currency of various denominations
Dividend Stocks

Should You Buy the 3 Highest-Paying Dividend Stocks in Canada?

A few dividend stocks saw a sharp correction in November, increasing their yields. Are they a buy for high dividends?

Read more »

money while you sleep
Dividend Stocks

Buy These 2 High-Yield Dividend Stocks Today and Sleep Soundly for a Decade

These stocks pay attractive dividends that should continue to grow.

Read more »

Pile of Canadian dollar bills in various denominations
Dividend Stocks

$15,000 Windfall? This Dividend Stock Is the Perfect Buy for Monthly Passive Income

If you get a windfall, after debt investing should be your next top option to create even more passive income!

Read more »

senior relaxes in hammock with e-book
Dividend Stocks

3 Canadian Dividend Stocks for Worry-Free Income

These Canadian stocks have consistently paid dividends, generating a worry-free passive income for investors.

Read more »

people relax on mountain ledge
Dividend Stocks

Invest $10,000 in This Dividend Stock for a Potential $4,781.70 in Total Returns

A dividend stock doesn't have to be risky, or without growth. And in the case of this one, the growth…

Read more »

ETF chart stocks
Dividend Stocks

2 Top TSX ETFs to Buy and Hold in a TFSA Forever

Don't get crazy. Just think simple growth with these two ETFs that are perfect in any TFSA.

Read more »

ETF stands for Exchange Traded Fund
Dividend Stocks

How to Use Your TFSA to Earn $900 Per Month in Tax-Free Income

This covered call ETF plus a TFSA could be your ticket to high tax-free passive income.

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

How to Turn a $15,000 TFSA Into $171,000

$15,000 may not seem like a lot, but over time that amount can balloon into serious cash.

Read more »