How to Earn $2,000 in Passive Income in 2025 With Less Than $45,000 in Savings

Looking to get a passive income boost in your portfolio. Here’s how to get a great mix of low-risk income and capital growth.

| More on:
ways to boost income

Source: Getty Images

Traditional forms of passive income like GICs (guaranteed investment certificates) and money market funds are becoming less attractive as interest rates fall. Many Canadian investors are having to head back to the stock market to capture passive income. While this does present higher risks, it also presents higher upside.

GICs are less attractive so stocks are the place for passive income

Stocks can earn both passive income and capital gains. The combination of the two can make for a great investment. However, you do also need to be wary. Buying a stock just for a high dividend yield can be dangerous.

An elevated dividend yield (like those trading over 7%) shows the market has some serious concerns about a company’s business or financials. An elevated yield is the first warning that an investor should carefully evaluate the business before adding it.

Don’t just look at high yield stocks

Stocks that trade with a yield between 3% and 6% tend to be a safer place to look. These stocks can generate enough cash to grow their business, pay dividends, and even grow their dividends.

You also tend to get much better stock appreciation from these stocks. If their income per share rises, chances are their stock price will rise in lockstep.

How to earn $2,000 of annual passive income with a 4.5% yield

If you have a target of $2,000 of passive income, you can easily figure out how much cash you will need to invest. Simply divide $2,000 by your average anticipated portfolio yield.

A 4.5% average yield is quite attainable on the TSX today. If you divide your $2,000 target by a 4.5% yield, you will need around $45,000 invested today. The great news is that there are plenty of stocks in this range.

First Cap: A quality real estate stock

For example, First Capital Real Estate Investment Trust (TSX:FCR.UN) stock offers a 4.8% distribution yield today. It is one of Canada’s largest urban-focused, grocery-anchored landlords.

Most of the REIT’s tenants offer essential services (think grocery and value stores, banks, medical clinics, etc.). As a result, this REIT is very economically resilient. Its high-quality locations are helping it capture strong rental rate growth and elevated occupancy (over 96%).

The REIT has ample land and development assets that are still not factored into the stock price. This stock offers a nice mix of passive income and value for investors today.

Pembina: A safe and steady stock for dividends

Another example is Pembina Pipeline (TSX:PPL). It offers passive income investors a 4.7% dividend yield. It is one of the largest energy infrastructure companies in Western Canada.

A highly contracted stream of earnings helps backstop its dividend. With a low dividend payout ratio, the company has been generating a lot of excess cash. As a result, it has an industry-leading balance sheet.

This has afforded Pembina the ability to make several smart acquisitions in the past few years. Likewise, it has over $3.5 billion of high-quality infrastructure projects in the works.

These projects should support mid-single-digit growth for the next few years. For stable passive income and a steady growth outlook, Pembina is a great stock to buy and hold.

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 Robin Brown has no position in any of the stocks mentioned. The Motley Fool recommends First Capital Real Estate Investment Trust and Pembina Pipeline. 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 $4,791.70 in Annual Passive Income

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 Year 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 »