Yes, a 3.5% Dividend Yield Is Enough to Generate Massive Passive Income

A passive-income dividend gem on the TSX checks three boxes at the same time. It pays a dividend you can rely on, it earns enough to keep funding that payout, and it has a clear path to stay relevant even as markets change. The real “gem” comes when investors overlook it because it feels boring. Boring can be beautiful when the cash keeps showing up and the business keeps quietly compounding.

Consider IGM

IGM Financial (TSX:IGM) fits that mould as it sits at the centre of Canadian investing habits. It runs IG Wealth Management and Mackenzie Investments, and it earns fee income on assets that Canadians entrust to it through advisers, mutual funds, exchange traded funds (ETF), and institutional mandates. It also has strategic investments that add extra upside when capital markets cooperate, including stakes tied to Wealthsimple and Rockefeller.

The dividend stock’s recent performance has been a pleasant surprise for anyone who wrote it off as “just another financial.” It rebounded strongly over the last year, with shares surging by 44% in the last year alone. That move suggests sentiment shifted back toward steady cash generators as markets price in a calmer rate backdrop.

Zoom out further and the picture gets even more interesting. In fact, over the last five years shares have climbed 80% in the last five years. That does not make it risk free, but it does show the stock can deliver more than a slow-and-steady stereotype when markets reward earnings strength, rising assets, and disciplined capital returns.

Earnings support

Earnings put some real meat on the bone. In the third quarter of 2025, IGM reported net earnings of $298.1 million and earnings per share of $1.26, up from $239.2 million and $1.01 a year earlier. It also reported adjusted net earnings of $301.2 million and adjusted earnings per share (EPS) of $1.27. Those are clean, confidence-building numbers for a dividend investor as they show the payout comes from actual profitability, not financial gymnastics.

The other key driver is whether assets keep growing, as that’s the fuel for fee income. IGM recently reported total assets under management and advisement of $310.1 billion at December 31, 2025, up 14.7% from a year earlier, alongside total consolidated net inflows of $310 million during December 2025. That combination of rising markets and positive flows often sets up a good next year for wealth managers, especially if clients stay invested instead of sitting in cash.

Valuation helps the story feel practical instead of dreamy. Right now, the dividend stock trades at 14.7 times earnings, with a trailing EPS of 4.4. It also lists an annual dividend of $2.25 and an annual dividend yield around 3.5% at writing. The near-term catalyst is simple: IGM plans to report Q4 2025 results on February 12, 2026, which can reset expectations for 2026 growth and capital returns. The main risks remain familiar: market pullbacks that reduce fee revenue, intense competition, and client flows that can swing when investors get nervous.

Bottom line

So, why is this dividend stock still a dividend gem every passive-income investor should know? Because it blends a reasonable valuation with a dividend that management continues to support, while the underlying business benefits when Canadians keep investing and markets keep trending higher. And right now, here’s what $7,000 could bring in.

COMPANYRECENT PRICENUMBER OF SHARESDIVIDENDANNUAL TOTAL PAYOUTFREQUENCYTOTAL INVESTMENTIGM$63.71109$2.25$245.25Quarterly$6,944.39

It won’t give you the adrenaline rush of a hot tech name, but it can give you something better. That’s a steady cash payout backed by real earnings, with a business model that still has room to grow.

The post Yes, a 3.5% Dividend Yield Is Enough to Generate Massive Passive Income appeared first on The Motley Fool Canada.

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Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.