Written by Demetris Afxentiou at The Motley Fool Canada
What would you do with some extra money in your budget each month? For many investors, that’s one of the goals of dividend investing. Building out an income stream that can eventually offset some of the monthly bills. And with just $200 a month in investing, it can become a reality.
I ran the numbers and came back with the results, using Bank of Nova Scotia (TSX: BNS) and Granite REIT (TSX: GRT.UN) as two examples.
While the early payments from these two stocks will be small, they do continue to grow, especially if those first payments are reinvested rather than spent.
First, let’s look at the stocks in our portfolio.
Scotiabank provides the dividend foundation
Scotiabank is a name familiar to most Canadian income investors. Canada’s big banks are well-known for their stable growth and healthy dividends.
In the case of Scotiabank, the bank has paid dividends without fail since 1833. Scotiabank has also provided investors with annual upticks to that dividend over the years.
As of the time of writing, Scotiabank offers a yield of 3.4%. That works out to just over $34 in dividends for every $1,000 invested.
While that portfolio is being built, those dividends can be reinvested to purchase more shares. Those additional shares then qualify for future dividends, gradually adding to what the monthly contributions buy.
Granite REIT adds monthly distributions
The second holding in our $ 200-a-month investment portfolio is Granite. Granite is a well-known REIT that offers exposure to logistics, warehouse and industrial properties across North America and Europe.
Granite’s rental business gives investors a slightly different income source from Scotiabank’s banking business.
As of the time of writing, Granite offers investors a yield of 4.2%. That works out to approximately $42 annually for every $1,000 invested. One key difference to note is that Granite pays distributions on a monthly schedule, which becomes an advantage when the time comes to begin collecting that cash.
But until then, those distributions can help fund additional units.
What $200 a month in investing could produce
Let’s assume we start from zero and begin contributing $200 each month, targeting an equal split between Scotiabank and Granite. That’s $2,400 in the first year.
Across both Scotiabank’s yield of 3.42% and Granite’s 4.20%, that gives us a blended yield of 3.81%. Our portfolio begins with an annual income of about $91 from that $2,400 first-year investment.
