Invest $18,000 in This Dividend Stock for $9,332.20 in Passive Income

One of the best dividend stocks out there is also one of the safest for creating a perfect passive income stream.

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 January 28, 2025 8:15 pm EST

Starting with $18,000 to create passive income from dividend stocks is a fantastic idea, especially for Canadian investors looking to build a stable income stream over the long term. This amount is large enough to invest in a diversified portfolio, key to managing risks and maximizing returns. By focusing on well-established dividend-paying stocks, you can enjoy a combination of steady income and potential capital growth. Among the many options available, Canadian Imperial Bank of Commerce (TSX:CM) on the TSX stands out as a particularly strong choice for dividend investors.

A close up color image of a small green plant sprouting out of a pile of Canadian dollar coins "loonies." — Source: Getty Images

CIBC stock

CIBC is one of Canada’s largest and most trusted banks, with a long history of rewarding its shareholders through consistent and growing dividend payments. As of early 2025, the dividend stock offers an attractive forward dividend yield of around 4%. Thus translating to annual dividends of $3.60 per share. With $18,000 to invest, this could provide you with approximately $705.60 in annual income, assuming you invest in CIBC alone.

Recent earnings further bolster CIBC’s case as a strong dividend stock. In its most recent report for the fourth quarter of 2024, the bank posted earnings per share (EPS) of $1.40, exceeding analysts’ expectations of $1.26. This 11% earnings surprise highlights the bank’s strong operational performance. Moreover, CIBC’s quarterly revenue showed year-over-year growth of 19.6%, reaching $5.9 billion, driven by strong performance in retail and business banking as well as wealth management.

When evaluating CIBC’s dividend sustainability, the numbers are reassuring. The bank’s dividend payout ratio sits at a manageable 51.7%, indicating that just over half of its earnings are distributed to shareholders as dividends, thus leaving plenty of room for reinvestment in growth opportunities and maintaining financial stability.

Performance

Looking back, CIBC has consistently demonstrated strong performance. Over the past year, its stock has delivered a total return of over 48%, significantly outpacing the broader TSX. This impressive performance reflects not only the bank’s operational efficiency but also investor confidence in its future prospects. With a trailing price-to-earnings ratio of 12.6, CIBC remains reasonably valued compared to its peers, thus making it an attractive option for investors seeking both value and income.

In terms of future outlook, CIBC is well-positioned to benefit from continued economic growth and rising interest rates, which typically boost the profitability of banks. The dividend stock is also focused on expanding its wealth management and capital markets divisions – higher-margin segments that contribute to its long-term growth. Another factor that sets CIBC apart is its commitment to consistent dividend growth. The bank has increased its dividend annually for over a decade, demonstrating a strong commitment to returning value to shareholders.

Bottom line

Starting with $18,000 gives you a meaningful amount to begin investing in dividend stocks like CIBC. By holding the stock in a Tax-Free Savings Account (TFSA), you can shield your dividend income and capital gains from taxes, maximizing your returns over time. So how much could it earn through returns and dividends should shares rise another 48%?

COMPANY	RECENT PRICE	NUMBER OF SHARES	DIVIDEND	TOTAL PAYOUT	FREQUENCY	TOTAL INVESTMENT
CM – now	$91.79	196	$3.60	$705.60	quarterly	$18,000
CM – 48%	$135.85	196	$3.60	$705.60	quarterly	$26,626.60

Now you’ve earned $8,626.60 in returns and $705.60 in dividends totalling $9,332.20 in passive income! Of course, diversification is key to managing risk. While CIBC is an excellent option, it’s a good idea to spread your investment across other dividend-paying stocks in different sectors. This will ensure that your portfolio is not overly exposed to the financial sector and that you’re well-positioned to weather market volatility.

All in all, starting with $18,000 to invest in dividend stocks is a smart move for generating passive income. CIBC stands out as a strong option due to its consistent dividend history, solid recent earnings, reasonable valuation, and promising future outlook. By investing in reliable dividend stocks like CIBC and diversifying your portfolio, you can build a stable foundation for long-term financial success. And enjoy the benefits of passive income along the way.