Investing $10,000 can generate a surprisingly large amount of passive income if you put it in the right place. With an average dividend yield of around 5%, for example, that $10,000 could earn you $500 a year without lifting a finger! And if you consistently reinvest those dividends, your income will grow over time, thanks to the magic of compounding. Over the years, what starts as a modest sum can snowball into a reliable stream of income, thereby making that initial $10,000 work harder for you year after year. So, how can investors get started?
Why the TFSA?
A Tax-Free Savings Account (TFSA) is the perfect tool for growing that $10,000 because it allows your investments to grow tax-free. This means you keep every penny of your earnings. Whether you’re investing in dividend stocks, exchange-traded funds (ETF), or bonds, all the gains, interest, and dividends are yours without worrying about taxes eating into your returns. Plus, when you’re ready to withdraw, everything comes out tax-free as well! By starting early and regularly contributing to your TFSA, you’ll build up that $10,000 faster than you think, especially as your investments compound over time.
Automating your contributions is like setting your TFSA to cruise control. By making small, consistent contributions, you remove the stress of timing the market and build your savings steadily. Whether it’s $100 a month or $500 every quarter, automating keeps you disciplined and ensures that you’re always growing your nest egg. Over time, those regular deposits add up, and before you know it, you’ll have a well-funded TFSA generating passive income for years to come without having to think twice about it!
Where to look
When it comes to creating large amounts of annual passive income, the best dividend stocks are typically those with a combination of high yields and consistent, reliable payouts. Look for businesses that tend to have steady cash flows and long histories of paying dividends. A stock with a yield of around 4-6% can really add up over time, especially when you reinvest those dividends for compounding growth.
Another factor to consider is dividend growth. Some companies not only pay out solid dividends but increase them, giving your passive income a nice boost. Stocks with a strong track record of increasing dividends, like Canadian banks or blue-chip companies, can provide both income now and growth for the future. By focusing on dividend-paying stocks that balance high yields and consistent growth, investors can create a robust stream of passive income that works for them long term.
BIP stock
Brookfield Infrastructure Partners (TSX:BIP.UN) is a fantastic option for investors seeking long-term, stable growth and passive income. With a forward annual dividend yield of 5.18% at writing, BIP.UN offers a reliable stream of income that’s hard to ignore, especially for those focused on building wealth through dividends. Its diverse portfolio of infrastructure assets, ranging from utilities to transport and data centres, ensures it has a strong, steady cash flow. Recently, it held $608 million in funds from operations (FFO) for the second quarter of 2024, a 10% increase from the previous year. This kind of performance shows how well-positioned the company is in both good and challenging economic times.
Plus, BIP.UN’s extensive global reach and ability to capitalize on trends like artificial intelligence (AI) and data infrastructure growth mean it’s not just sitting still. The company continues to make strategic acquisitions, like a 10% stake in a Brazilian rail and logistics operation. Thereby boosting its long-term revenue potential. With a market cap of $19.47 billion and a solid balance sheet, BIP.UN is built for stability and growth, thus making it a great choice for investors who want to combine income with long-term capital appreciation.
Bottom line
So how much can you get? Here’s what $10,000 could achieve in just one year of dividend income and returns based on a compound annual growth rate of 8.5% in the last decade.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | PORTFOLIO TOTAL |
| BIP.UN – now | $42.75 | 234 | $2.19 | $512.46 | quarterly | $10,000 |
| BIP.UN – 8.5% | $46.83 | 234 | $2.19 | $512.46 | quarterly | $10,958.22 |
As you can see, with $512.46 in dividends and $958.22 in returns, that’s total passive income of $1,470.68 — all in just one year!
