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'Generate income without a paycheck': This investing strategy can make you money while you sleep – CNBC

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Financial sites across internet will tell you how you can earn passive income, but let’s be honest — a lot of what’s touted as passive income isn’t actually passive.

Take real estate investing. Once you buy a rental property, the thinking goes, your renters cover your mortgage and then some. Every time you hike the rent, that’s more profit in your pocket. Any honest real estate investor will tell you, however, that being a landlord is work — oftentimes quite a lot of it.

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If you want to generate income that’s truly passive, consider dividend investing. While relying on cash payouts from a stock portfolio is a common strategy for those nearing and in retirement, anyone can build an equity income portfolio, says Brian Bollinger, president of Simply Safe Dividends.

The goal for many users of his site, old and young, says Bollinger: “Generate income without a paycheck.”

Here’s the general gist. You invest in companies that regularly distribute a certain amount of money to their shareholders. If all goes well, you collect a growing pile cash each year while the stocks you own appreciate in value.

How dividend investing provides income

A quick refresher on how dividends work: Companies that earn excess profit can choose to return some of that money to their shareholders, as a sort of thank you, in the form of a regular cash payout. Some investors use these dividends as a form of income. Other, usually longer-term investors like to take those dividend payments and reinvest them, thereby boosting the return they earn on the stock.

For both types of investors, determining the attractiveness of a dividend comes down to the stock’s yield, found by dividing the amount of money an investor receives from a single share into the stock’s share price. If one share of stock costs $100 and comes with a $1 annual payout (a common configuration might be quarterly payments of 25 cents), its dividend yield is 1%.

Stocks in the S&P 500 index currently yield about 1.5% on aggregate. That means, if you have $1 million invested in a mutual fund or exchange-traded fund that tracks the index, you could expect annual dividend income of about $15,000.

Dividend income strategies to consider

Whether you’re choosing your own dividend stocks or investing through a mutual fund or ETF, you’d generally be wise to follow one of these two dividend strategies that aligns with your particular needs, experts say.

1. Higher yield

Investors looking to maximize their income may target stocks or funds that pay a high yield.

While the income such stocks offer can look juicy — individual stocks in the S&P 500 currently yield as high as 9.7% — you don’t have to think too hard about the calculation above to see why some yields are higher than others. The more a stock falls in price, the higher its yield climbs.

Companies that are in trouble not only provide shaky returns, but may be forced to cut the dividend as a result of poor financial results.

“Stuff that’s over 5% or 6% probably isn’t a good idea if you’re a risk-averse investor,” says Bollinger. “Even if the dividend does end up staying stable, it’s pretty unlikely to grow.”

One way to defray some of the risk is to invest in a broad basket of dividend stocks, says Todd Rosenbluth, head of research at VettaFi. “The benefits of diversification become really important,” he says. “Owning dividend stocks in an ETF can make a lot of sense for equity income-oriented investors.”

2. Dividend growth

Some dividend investors are happy to take a lower yield — maybe even not much higher than the S&P 500’s — to invest in companies that steadily grow their payout.

“I generally like to advocate for an approach of targeting great businesses that might pay closer to a 3% to 4% dividend yield,” says Bollinger. Such companies often steadily grow their payout, which boosts your annual income stream — a move that helps offset the effects of inflation, he says.

Among companies with smaller yields, “you’re usually looking at safer companies with safer payouts as well,” Bollinger says.

Not all stocks that yield in this range will grow their payout, and pros like Bollinger have created tools to help determine the whether a company is likely to, taking into account fundamental factors such as earnings growth, debt and trajectory of cash flows.

Short of that, many investors seeking steady dividend growth look to the past, relying on companies with a long history of dividend growth. The S&P Dividend Aristocrats index for instance, includes companies in the broader index that have hiked their dividend for at least 25 consecutive years. Stocks in the index currently yield 2.5%.

Many of these firms are established, financially mature companies, says Bollinger. Building a diversified portfolio of them, he says, can give you peace of mind that you’re building an underlying portfolio that will continue to grow alongside an expanding pile of passive income — regardless of swings in the market.

“When stock prices fall, it’s so easy to panic, but dividend investing can overcome that because you’re just trying to stay focused on your income stream,” says Bollinger. “You don’t care so much about the markets’ short-term ups and downs anymore.”

Want to land your dream job in 2024? Take CNBC’s new online course How to Ace Your Job Interview to learn what hiring managers are really looking for, body language techniques, what to say and not to say, and the best way to talk about pay.

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Real Bedford gets £3.6m cryptocurrency investment – BBC.com

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Billionaire twins invest in ninth-tier football club

Tyler and Cameron Winklevoss will become co-owners of the club

A non-league football club has received an injection of $4.5m (about £3.6m) from a pair of cryptocurrency investors.

Real Bedford FC (RBFC) received the Bitcoin investment from Winklevoss Capital, an investment firm owned by Gemini founders Cameron and Tyler Winklevoss.

Podcaster Peter McCormack bought the side, currently in the ninth tier of English football, in 2021 with the goal of turning it into a Premier League club.

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Following the investment the twins will assume the role of co-owners of the club alongside the cryptocurrency podcaster.

Peter McCormack
Peter McCormack bought Bedford FC in 2021 and renamed it Real Bedford

Analysis: Shiona McCallum, BBC Senior Technology Reporter

The Winklevoss brothers are pretty familiar with controversy. They famously accused Facebook founder Mark Zuckerberg of stealing the idea for his site from them when they were all at Harvard together.

Following a lengthy lawsuit, eventually the twins received a settlement that included a whopping $20m (£16m) in cash and shares in the company.

You might remember it all playing out in the 2010 Oscar-winning film The Social Network. Well, since then the pair have been carrying the flag for cryptocurrencies, and are two of the world’s first well-known Bitcoin billionaires.

Not only do Tyler and Cameron own an enormous number of Bitcoins, they also built a crypto exchange called Gemini which is, essentially, a stock exchange for crypto coins.

But that endeavour hasn’t been plain sailing, either; just this year they were ordered to return more than $1bn (£800m) to customers due to a defunct lending programme and pay a large fine for unsafe and unsound practices.

It’ll be interesting to see how their fortunes fare when it comes to football but it’s really not a bad time for Bitcoin right now. Its value has risen to an all-time high in recent weeks.

‘Investing in a dream’

Gemini started its sponsorship of the club in January 2022.

The investment will be used for the development of a new training centre, the launch of a football academy for new talent and to continue supporting girls and youth football.

The club said the funds would also be used to establish “a Bitcoin treasury to secure the club’s long-term ambitions”.

Tyler Winklevoss said he was excited to work alongside Mr McCormack as a co-owner.

“We share in Peter’s deep conviction in Bitcoin and its ability to supercharge RBFC’s quest to make it into the Premier League,” he said.

His brother added: “We’re not just investing in a football club. We’re investing in a dream to bring Premier League football to Bedford.”

RBFC currently sit at the top of the Spartan South Midlands Football League Premier Division.

Mr McCormack said: “The backing from Tyler and Cameron will allow us to continue investing in Bedford and the local community.”

Follow East of England news on Facebook, Instagram and X. Got a story? Email eastofenglandnews@bbc.co.uk or WhatsApp us on 0800 169 1830

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Passive Income: How Much Should You Invest to Earn $1000 Every Month? – The Motley Fool Canada

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Investing in high-yielding dividend stocks can be a reliable means of earning a stable passive income. One has to invest around $180,000 in monthly-paying dividend stocks, which offer dividend yields of over 6.7%, to earn a monthly income of $1,000. Let’s look at three top monthly-paying dividend stocks that could help you earn $1,000 monthly.

COMPANY RECENT PRICE NUMBER OF SHARES INVESTMENT DIVIDEND MONTHLY DIVIDEND FREQUENCY
NWH $5.08 11811 60,0000 $0.03 $354.3 Monthly
WCP $10.47 5730 59,993 $0.0608 $348.4 Monthly
EXE $7.37 8141 59,999 $0.04 $325.6 Monthly
Total $1,028.4

NorthWest Healthcare Properties REIT

NorthWest Healthcare Properties REIT (TSX:NWH) owns and operates 219 defensive healthcare properties, with a total leasable area of 17.7 million square feet. The company was under pressure over the last few months due to concerns over rising interest rates and an increase in its leverage. However, the REIT has undertaken several initiatives, such as divesting $450 million of non-core assets. Besides, it has slashed its monthly dividend and amended, extended, and refinanced its debt facilities, strengthening its financial position.

Besides, NorthWest Healthcare reported impressive occupancy and rent collection rates of 97% and 99%, respectively, in the December-ending quarter. Its topline grew 4.1%, primarily due to rental lease indexation. However, the increase in interest expenses amid higher interest rates and adjustments to investment property fair values weighed on its bottom line, with its net losses increasing from $135.5 million to $188.9 million. However, the company’s initiatives could boost its profitability in the coming quarters.

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Also, despite slashing dividends, its forward yield stands at a juicy 7.09%. Further, it trades at a cheaper price-to-book multiple of 0.6, making it an attractive buy.

Whitecap Resources

Oil prices have strengthened this year, with WTI (West Texas Intermediate) crude rising around 17% since the beginning of this year. The extension of voluntary production cuts by OPEC (Organization of the Petroleum Exporting Countries) and its allies has raised concerns of a supply deficit. Besides, the geopolitical tension in the Middle East has also supported oil prices. Meanwhile, few analysts predict more upsides to oil prices. Higher oil prices could benefit oil-producing companies, such as Whitecap Resources (TSX:WCP), which acquires and owns oil and natural gas-producing assets.

The Calgary-based company plans to make a capital investment of $900-$1,100 million this year, strengthening its asset base. Amid these investments, the company expects its 2024 average production to be between 165,000-170,000 barrels of oil equivalent per day, with the midpoint representing a 7% increase from the previous year. In the long run, WCP’s management expects its average production to reach 210,000 barrels of oil equivalent per day by 2028, representing annualized growth of 5%. Higher production and favourable oil prices could boost its financials, making its future dividend payouts safer.

Meanwhile, WCN currently pays a monthly dividend of $0.0608/share, with its forward yield at 6.97%. It also trades at an attractive NTM (next 12 months) price-to-earnings multiple of 6.5, making it an ideal buy.

Extendicare

Another top monthly-paying dividend stock would be Extendicare (TSX:EXE), which offers care and services to seniors across Canada. Last month, the company reported an impressive fourth-quarter performance, with its revenue growing by 12.8% amid improved occupancy, rate hikes, and increased funding. Besides, its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) increased by 47.2% to $28.7 million amid topline growth and cost management efforts.

With the growing aging population, the demand for care and services could rise, thus expanding the addressable market for Extendicare. The Markham-based company began the construction of two new LTC (long-term care) homes in the Ottawa region, therefore increasing the number of LTC homes under construction to six. Besides, it expects to open three of these LTC homes this year. So, its growth prospects look healthy.

Meanwhile, Extendicare is currently paying a monthly dividend of $0.04/share, with its forward yield currently at 6.51%. Also, its NTM price-to-sales multiple stands at 0.5, making it an excellent buy.

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GIC investors, here's how the latest from the Bank of Canada affects you – The Globe and Mail

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There’s good news from the bond market for anyone seeking returns of 5 per cent with minimal risk.

Yields in the bond market are one of the biggest influences on returns from guaranteed investment certificates, which present virtually no risk of losing money thanks to deposit insurance. Since the Bank of Canada rate announcement on Wednesday, bond yields have ticked higher.

For borrowers, it would have been ideal if the central bank indicated imminent rate cuts. The bank did leave the door open to cuts in June or July, but its overall tone suggested inflation hasn’t yet been subdued enough to make rate cuts a slam dunk. The Bank of Canada’s view on things was supported by the latest inflation number in the United States, which was disappointingly high.

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Investors in the bond market latched onto these U.S. and Canadian developments and sent bond prices lower. Lower prices mean higher yields, and vice versa. Bond yields didn’t rise enough to sustain hopes of an immediate wave of GIC rate increases. But they create room for better GIC rates from banks and credit unions that want to attract money for mortgage lending as we head into the spring home buying season. The way to do that is to offer a better GIC rate.

Many alternative banks and credit unions currently offer one-year rates of 5 to 5.4 per cent for one year, and several offer 5 to 5.3 per cent for a two-year term. The best three-year rates were just a tick below 5 per cent at 4.75 to 4.9 per cent. For four and five years, the best rates topped out around 4.75 per cent.

Five-year GIC rates climbing to 5 per cent or higher would mean rising pessimism in the bond market about inflation and rate cuts. We likely won’t get to that point, but there’s enough concern about inflation right now to provide a firm floor for one- and two-year GIC rates of 5 per cent or more.

If you can’t get that rate from your bank, don’t settle. Look elsewhere.

— Rob Carrick, personal finance columnist

This is the Globe Investor newsletter, published three times each week. If someone has forwarded this e-mail newsletter to you or you’re reading this on the web, you can sign up for the newsletter and others on our newsletter signup page.

The Rundown

The 2024 Globe and Mail ETF Buyers Guide, Part Four: International equity funds

More than ever, your portfolio needs diversification into stock markets outside North America. The S&P 500 is 30 per cent weighted to technology stocks these days, and there are seven dominant stocks within that sector. The case for international investing is that you get exposure to markets beyond Canada and the United States, without a big tech presence. For help in picking an international equity fund, check out Rob Carrick’s fourth instalment of the 2024 Globe and Mail ETF Buyer’s Guide.

Is BCE’s high dividend yield scaring you? Two reasons why it shouldn’t

No one wants Canadian telecom stocks right now. That may be their most attractive feature, argues David Berman.

Unraveling U.S. rate cut bets spur investor portfolio shifts

Expectations for how much policy easing the Federal Reserve can deliver are falling rapidly as one strong economic report after another suggests inflation could come creeping back if the U.S. central bank lowers borrowing costs prematurely. The fading prospect of rate cuts presents a dilemma to market participants who piled into stocks and bonds over the last few months in hopes of a policy easing, leaving some of them scrambling to readjust their portfolios. Reuters tells us more about how fund managers are reacting.

Also see, from Reuters’ Mike Dolan: If Fed hikes spurred rent inflation, markets should relax

Here’s how to squeeze out more yield from your bond portfolio – if you’re brave enough

The sovereign debt crisis that many have been warning about has yet to materialize, but it will eventually, says veteran bond fund manager Tom Czitron. But that doesn’t mean all investors should stay clear of having exposure to bonds in emerging markets. With the right approach and risk tolerance, he says allocating a small weighting of one’s portfolio in countries with below-investment-grade credit ratings could be quite profitable.

Bulls jump deeper into copper amid supply challenges, AI-fueled demand

Copper’s bull run should continue for at least the next three years, fueled by global supply challenges and hot demand for the metal to power energy transition and artificial intelligence technologies, industry analysts say. As Reuters reports, the outlook is an optimistic harbinger for Freeport-McMoRan, BHP and other producers as decarbonization and technological shifts fuel copper’s latest demand wave after China’s rise powered a similar one two decades ago.

Others (for subscribers)

The highest-yielding stocks on the TSX, plus risk data

Number Cruncher: Five conglomerates with potential to unlock ‘holding company discounts’

Number Cruncher: 13 mutual funds and ETFs that are overweight in the Magnificent Seven

Friday’s analyst upgrades and downgrades

Thursday’s analyst upgrades and downgrades

Monica Rizk: Bullish on Nucor Corp.

Globe Advisor

Why this money manager is buying Intact and selling Choice Properties REIT

Childhood hardship put this advisor on a path to financial independence

Are you a financial advisor? Register for Globe Advisor (www.globeadvisor.com) for free daily and weekly newsletters, in-depth industry coverage and analysis.

Ask Globe Investor

Question: I own the BMO S&P 500 Index ETF (ZSP-T) in my registered retirement income fund and tax-free savings account. Can you explain the withholding tax implications of holding ZSP in these accounts, and whether there is a better way to get exposure to U.S. stocks?

Answer: It’s a bit complicated, but I’ll try to make the explanation as straightforward as possible.

If you own a Canadian-listed exchange-traded fund such as ZSP that invests in U.S. stocks, the ETF will be subject to a 15-per-cent U.S. withholding tax on the U.S. dividends paid to it by the underlying companies. The withholding tax applies regardless of the type of account – registered or non-registered – in which you hold the Canadian-listed U.S. equity ETF.

Canadian investors can avoid withholding tax on U.S. dividends by investing in U.S. stocks directly or through a U.S.-listed ETF. However, to qualify for a withholding tax exemption under the Canada-U.S. tax treaty, the U.S.-listed stocks or ETF must be held in a RRIF, registered retirement savings plan or other account that specifically provides retirement or pension income. (Sorry, a TFSA doesn’t count.)

Still, investing in U.S.-listed ETFs or individual U.S. stocks has its own drawbacks. Unless you already have sufficient U.S. cash on hand, you’ll need to convert your Canadian dollars into U.S. dollars to make the purchase. This can be expensive, as brokers typically charge exchange rates that could cost you 1.5 per cent or more on each transaction.

When I checked with my broker on Friday, for example, converting $10,000 into U.S. dollars, then back into Canadian dollars, would have cost about $315, or more than 3 per cent of the principal amount. That’s a hefty price to pay just for currency transaction costs.

Most Canadian-listed U.S. ETFs, on the other hand, trade in Canadian dollars, eliminating the need for investors to purchase U.S. dollars. The ETF itself handles currency conversions to purchase U.S. shares, but the costs aren’t nearly as onerous because ETF companies deal with large sums of money and get access to institutional exchange rates not available to the general public.

It’s also important to keep the withholding tax issue in perspective. The S&P 500 Index currently yields just 1.4 per cent. Subtracting withholding tax of 15 per cent would reduce the net yield to about 1.2 per cent – a loss of about 0.2 percentage points.

That’s not a big deal. Based on a $10,000 investment in ZSP, the annual drag from withholding tax would be about $20. At that rate, it would take about 15 years for the accumulated withholding tax to equal the currency transaction costs for buying and selling a U.S.-listed ETF that is not subject to withholding tax in a retirement account.

Bottom line: Don’t let a small amount of withholding tax stop you from investing in a Canadian-listed S&P 500 ETF and holding it in your RRSP, RRIF, TFSA or any other account.

–John Heinzl (E-mail your questions to jheinzl@globeandmail.com)

What’s up in the days ahead

Will the ETF revolution eventually mean the death of mutual funds? Tim Shufelt will explore the topic.

Consumers, votes and earnings: World market themes for the week ahead

Click here to see the Globe Investor earnings and economic news calendar.

More Globe Investor coverage

For more Globe Investor stories, follow us on Twitter @globeinvestor

Compiled by Globe Investor Staff

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