Buy This Blue-Chip Dividend Stock and Relax

A blue-chip dividend stock is the best way investors can create passive income and relax, but how do you create income when you’re limited for funds?

Amy Legate-Wolfe

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote: “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published September 19, 2023 12:30 pm EDT

| More on: RY

In today’s unpredictable financial landscape, finding a reliable and stress-free way to invest is crucial. Enter the world of blue-chip dividend stocks and passive income, a combination that not only offers a sense of security but can also sustain you comfortably through retirement.

In this article, we’ll explore the path to creating a passive income stream, discuss the merits of investing in a Tax-Free Savings Account (TFSA), and highlight the exceptional opportunity that blue-chip dividend stocks like Royal Bank of Canada (TSX:RY) can offer.

Meeting handshake — Image source: Getty Images

Creating a passive income stream

Creating a passive income stream that lasts is one of the best moves towards finding a great way to relax in retirement. One innovative method is renting out extra storage space through Neighbor, a trusted platform that connects renters with people in need of storage. Whether it’s a spare room, garage, or even an unused shed, Neighbor makes it simple to list your space and start earning extra income.

To get started, sign up on Neighbor’s user-friendly website or mobile app. Follow their step-by-step instructions for listing your available storage space, complete with photos and descriptions. The platform provides various security features, such as secure payment processing and insurance options, to ensure both hosts and renters are protected.

The potential income from renting out your unused space can be substantial, depending on location and space size. On average, you could earn anywhere from $50 to $500 per month, or even more in high-demand areas. Imagine the financial freedom that comes from turning your underutilized space into a steady stream of income.

Where to invest your passive income

Once you’ve established a passive income stream, it’s essential to make your money work for you. One of the most tax-efficient ways to invest your earnings is through a TFSA. A TFSA allows your investments to grow tax-free, and any withdrawals are also tax-free, making it an excellent choice for those looking to maximize their returns while minimizing their tax liability.

To get started, open a TFSA account with your preferred financial institution or brokerage. When your passive income starts flowing in, contribute it to your TFSA. With TFSA contribution limits currently at $6,500 per year, you can steadily build a tax-free investment portfolio.

Invest in a blue-chip dividend stock

Now that you have a growing pool of funds within your TFSA, consider investing in a blue-chip dividend stock like Royal Bank stock. Royal Bank is a banking titan with a rich history spanning over a century, making it a cornerstone of the Canadian financial sector.

The reason investors want a blue-chip dividend stock like this one is safety. Blue-chip stocks are well known companies, and usually household names. They have been around for decades, providing growth and income for shareholders.

Over the past decade, Royal Bank stock has demonstrated remarkable resilience and growth, with its share price surging by an impressive 81%. As of writing, the stock offered a generous dividend of $5.40 per share. This dividend aristocrat has consistently rewarded its shareholders, making it a reliable choice for those seeking passive income.

Bottom Line

Let’s put the pieces together to illustrate the potential of this strategy. Suppose you generate $5,000 annually from renting out your unused storage space. With each share of Royal Bank stock priced at $120, you could purchase approximately 41 shares with your annual income. At a dividend of $5.40 per share, these shares would yield approximately $221.40 in annual dividend income.

This passive income strategy allows you to create wealth without incurring any initial costs. The rental income from your shed, room, or garage provides the capital to invest in a stable and lucrative asset like Royal Bank stock. Over time, your dividends can compound, further increasing your passive income and creating a robust financial cushion.

This combination of blue-chip dividend stocks and passive income from renting out unused space offers a secure and effective path to financial stability. By leveraging platforms like Neighbor and investing within a TFSA, you can build a substantial passive income stream that will not only weather market fluctuations but also provide lasting financial security for your retirement. So, why not embark on this journey to financial freedom and relaxation in an uncertain world?