Unlike real estate, you don’t need millions to buy a passive income-producing asset. With $20,000 you could even buy a diverse portfolio of stocks that will deliver attractive dividends and hopefully capital gains over time.
If you’re wondering how to create an investing cash flow machine, here’s a $20,000 portfolio split evenly between four quality dividend stocks. This portfolio would produce an average passive income of $79.02 per month, or $948.24 per year.
An energy infrastructure stock for a secure income
The first dividend stock I would put $5,000 in is Pembina Pipeline (TSX: PPL). With a quarterly dividend of $0.71 per share, Pembina stock yields 5.4% today. An investment of $5,000 would return $66.03 per quarter or $264.12 annually.
Pembina operates a critical franchise of gathering and exit pipelines, gas processing facilities, storage and export terminals. For many Western Canadian producers, Pembina provides a primary means of bringing raw materials to market.
Pembina is interesting because it has a great balance sheet, high-quality contracted assets, an attractive mix of growth opportunities and a cheap valuation compared to peers. The dividend is well supported by cash flows, so it’s a great addition before the valuation moves closer to the sector.
A diversified monthly income leader
Another stock I would buy for cash flow is Exchange Income Corporation (TSX: EIF). It pays a monthly dividend of $0.22 per share for a yield of 3.4%. A $5,000 investment in Exchange would generate $14.08 per month or $168.96 in annual income.
Exchange Income operates a diversified business with aerospace, aviation and industrial businesses. It provides niche services such as emergency medical air transportation to communities in northern Canada. These are places that are difficult to reach and require specialized operations.
It has delivered great long-term returns for shareholders. The share price is up 129% over the last five years and 222% over the last ten years. Add in dividends and those returns are 197% and 482% respectively. It has increased its dividend seventeen times in the last twenty years.
A quality real estate share
If you want to own real estate, you can buy REITs (real estate investment trusts) on the website TSX. Dream Industrial REIT (TSX:DIR.UN) is one of the largest industrial landlords in Canada. It also has a large portfolio in Western Europe.
The properties are characterized by attractive urban locations, high-quality tenants, long-term leases and an attractive occupancy rate (over 94%). While the dividend hasn’t grown recently, the payout ratio has dropped significantly (meaning the dividend is very safe).
It pays a monthly benefit of $0.0583 per unit. Dream yields 5.8%. A $5,000 investment would produce $23.33 in monthly cash flow, or $280 per year.
A player in the field of renewable energy
Northland Power (TSX:NPI) is another Canadian stock in terms of dividend cash flow. It pays a monthly dividend of $0.10 per share. It yields 4.65%.
Northland operates a diverse portfolio of renewable assets, including onshore and offshore wind, battery power, solar and utilities. Two major projects are due to be completed next year. That could be a big boost to cash flow (and possibly the dividend).
A $5,000 investment in Northland would return $19.60 monthly or $235.20 per year.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| Pembina Pipeline | $53.37 | 93 | $0.71 | $66.03 | Quarterly |
| Exchange Income Corporation | $77.46 | 64 | $0.22 | $14.08 | Monthly |
| Dream Industrial REIT | $12.48 | 400 | $0.0583 | $23.33 | Monthly |
| Northland Power | $25.39 | 196 | $0.10 | $19.60 | Monthly |
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