Build a Cash-Gushing Passive-Income Portfolio With just $40,000

Building a portfolio that spits out reliable passive income doesn’t require six figures or a complex strategy. With just $40,000, Canadian investors can create a steady, cash-flowing machine by investing in a simple dividend exchange traded fund (ETF) or a few hand-picked dividend stocks that offer higher yields, stronger growth, or both.

Below is a blueprint that shows exactly how that can be done — and how surprisingly far $40,000 can go when deployed with intention.

Investing passively in dividend ETFs

For investors who want to keep things simple, the Vanguard FTSE Canadian High Dividend Yield Index ETF (TSX:VDY) can be an easy foundation. VDY targets established Canadian companies that pay out above-average dividends. Naturally, that leads to heavy exposure to financials and energy — sectors that dominate the Toronto Stock Exchange’s dividend universe.

Top holdings include:

• Royal Bank of Canada: 15.2% of the fund
• Toronto-Dominion Bank: 10.3%
• Enbridge: 7.4%
• Bank of Montreal: 6.5%
• Bank of Nova Scotia: 6%
• Canadian Imperial Bank of Commerce: 5.7%

At recent prices, VDY yields about 3.4%, meaning a $40,000 investment generates roughly $1,348 per year, paid monthly. That’s a solid start for hands-off income.

ETFRecent PriceNumber of UnitsDistributionTotal Annual PayoutFrequencyTotal InvestmentVDY$60.46661$0.17$1,348.44Monthly$39,964.06

While VDY is a good core holding, it is heavily concentrated — roughly 56% in financials and 27% in energy. That leaves gaps for investors who want higher yield, stronger dividend growth, or sector diversification.

That’s where a carefully constructed portfolio of individual dividend stocks can supercharge the income stream.

Get higher yield and growth

To build a more robust income portfolio, dividend stocks should meet three basic criteria:

1. Sustainable payouts
2. Attractive yields
3. Reasonable valuations

The following three Canadian names check all these boxes. An equal-weight allocation of about $13,300 to each results in a blended yield close to 4.6%, noticeably higher than VDY’s yield.

CompanyRecent PriceNumber of SharesDividendTotal Annual PayoutFrequencyTotal InvestmentSLF$80.70165$0.92$607.20Quarterly$13,315.50BIP.UN$50.76263About $0.6025$633.83Quarterly$13,349.88GSY$129.02103$1.46$601.52Quarterly$13,289.06$1,840.14$39954.44

Sun Life: A durable dividend with steady growth

Sun Life (TSX:SLF) is a global life and health insurer with a decade-long streak of dividend growth, averaging an attractive 8.4% compound annual growth rate (CAGR). Its most recent increase — 8.6% — (on a trailing-12-month basis) is consistent with its long-term trend.

At around $80 per share, the stock trades roughly 11% below analyst consensus and near its historical valuation norms. With a 66% payout ratio and expected earnings growth, its nearly 4.6% yield looks well protected.

Brookfield Infrastructure Partners: Income built to last

Brookfield Infrastructure Partners (TSX:BIP.UN) delivers a growing cash distribution in U.S. dollars, giving Canadian investors a potential currency tailwind. The company owns essential, long-life assets — pipelines, toll roads, utilities, data centres, rail networks — with cash flows that are largely contracted and inflation-indexed.

At approximately $50.76 per unit, BIP.UN yields about 4.7%, supported by a healthy 60–70% payout ratio.

goeasy: High growth meets high yield

goeasy (TSX:GSY) has been hit hard recently, presenting a compelling buy-the-dip opportunity. Despite the volatility, the company has raised its dividend for 10 straight years, with an extraordinary 30% CAGR over the past decade.

At roughly $129, goeasy yields about 4.5%, far above its historical average yield of 2.3% over the past decade. Its 36% payout ratio gives it a margin of safety, and the stock currently trades at a 29% discount to its long-term normal price-to-earnings (P/E) ratio.

Investor takeaway: $40,000 can produce serious passive income

A $40,000 portfolio built with VDY provides simplicity, better diversification, and annual income of about $1,350. The same amount invested across the three individual stocks above can generate about $1,840 annually — and more importantly, this income can grow over time. 

When investing in dividend stocks, the key is to look out for sustainable payouts, good valuations (i.e., don’t overpay for stocks), and companies that reliably raise dividends.

That’s how a modest portfolio becomes a cash-gushing passive-income machine.

The post Build a Cash-Gushing Passive-Income Portfolio With just $40,000 appeared first on The Motley Fool Canada.

Should you invest $1,000 in Vanguard FTSE Canadian High Dividend Yield Index ETF right now?

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* Returns as of November 17th, 2025

More reading

• 3 Rock-Solid Dividend Stocks to Own for the Next 15 Years
• The Best Stocks to Invest $1,000 in a TFSA Right Now
• 1 Magnificent Canadian Dividend Stock Down 11% to Buy and Hold for Decades
• Here Are My Top 4 Undervalued Stocks to Buy Right Now
• TSX Today: What to Watch for in Stocks on Wednesday, December 3

Fool contributor Kay Ng has positions in Brookfield Infrastructure Partners, goeasy, and Sun Life Financial. The Motley Fool recommends Bank of Nova Scotia, Brookfield Infrastructure Partners, and Enbridge. The Motley Fool has a disclosure policy.