How much do you have to invest to get $500 in dividends each and every month?
It all depends on your portfolio’s dividend yield. With a 10% yield and monthly payout schedule, you can get to $500 a month with only $60,000 invested. That is, $6,000 per year paid on a monthly basis. Unfortunately, most stocks don’t have yields anywhere near 10%. Many do have high enough yields to get you to $500 a month with diligent savings, but don’t pay monthly. In this article, I will explore two methods for getting to $500 per month in dividend income: the slow way and the fast way.
The safe but slow way
The safest way to get to $500 per month in dividend income is to simply invest in dividend-paying index funds. Such funds are among the least risky equity investments you can buy, as they are very diversified and have low fees. The flip side is that their yields are typically quite low, so you need to save lots of money in order to make $500 per month off them.
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Consider the IShares S&P/TSX Composite Index Fund (TSX:XIC), for example. It’s a broad market index fund based on the TSX Composite Index – the index of Canadian stocks trading on the Toronto Stock Exchange. It has 240 stocks, which provides plenty of diversification and low risk. Also, it has only a 0.06% MER, which means that if you invest in the fund, you won’t lose too much to management fees. It is, on the whole, a compelling package. The downside is that XIC only has a 3% dividend yield, so you need to invest a whole $200,000 before you can get to $6,000 a year in dividend income.
The risky but fast way
As we’ve seen, it takes a decent-sized chunk of change to get to $500 per month in passive income with index funds. That’s just the price you’ll have to pay if you want to achieve substantial dividend income safely.
If you’re willing to assume a little more risk, you could consider high yield stocks like First National Financial (TSX:FN). First National Financial is a non-bank lender whose shares yield 6.5%. With a 6.5% yield, you only need to invest about $92,500 in order to get to $500 per month in dividend income. Best of all, FN is a monthly pay dividend stock, meaning you do in fact get that $500 each and every month. With the previous example, the XIC ETF, I said you could get a sum each year that averages out to $500 per month. Here, I’m talking about an actual $500 monthly cashflow.
How safe is First National Financial’s dividend? Going by the payout ratio, it appears pretty safe. The company pays out just 58% of its earnings as dividends, which is acceptable. Also, the company is performing well this year. In its most recent quarter, it delivered:
$142 billion in mortgages under administration, up 10%.
$563 million in revenue, up 43%.
$83.6 million in net income, up 108%.
All in all, it was a very strong showing. First National appears to be doing well enough to justify its 6.5% dividend yield.
Before you consider First National Financial Corporation, you'll want to hear this.
Our market-beating analyst team just revealed what they believe are the 5 best stocks for investors to buy in November 2023... and First National Financial Corporation wasn't on the list.
The online investing service they've run for nearly a decade, Motley Fool Stock Advisor Canada, is beating the TSX by 24 percentage points. And right now, they think there are 5 stocks that are better buys.
Fool contributor Andrew Button 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.
That usually comes in quarterly, semi-annual or annual payments. Shares of public companies that split profits with shareholders by paying cash dividends yield between 2% and 6% a year. With that in mind, putting $250,000 into low-yielding dividend stocks or $83,333 into high-yielding shares will get your $500 a month.
To earn $500 per month in dividends from Realty Income, you would need to own 1,946 shares at the current dividend rate. With a recent share price of $55.45, this would require a total investment of $107,905.70, which may be out of reach for many investors.
However, this isn't always the case. If you're looking to generate $300 in super safe monthly dividend income (note the emphasis on "monthly" income), simply invest $43,000, split equally, into the following two ultra-high-yield stocks, which sport an average yield of 8.39%!
In a market that generates a 2% annual yield, you would need to invest $600,000 up front in order to reliably generate $12,000 per year (or $1,000 per month) in dividend payments. How Can You Make $1,000 Per Month In Dividends?
Too many people are paid a lot of money to tell investors that yields like that are impossible. But the truth is you can get a 9.5% yield today--and even more. But even at 9.5%, we're talking about a middle-class income of $4,000 per month on an investment of just a touch over $500K.
A stock portfolio focused on dividends can generate $1,000 per month or more in perpetual passive income, Mircea Iosif wrote on Medium. “For example, at a 4% dividend yield, you would need a portfolio worth $300,000.
As long as you keep the withdrawal rate at or below 4%, your money should last for decades. To apply the 4% rule, divide your income requirement by 4% to calculate your targeted portfolio size. If $75,000 is your income requirement, for example, you can safely get it from a $1.87 million portfolio.
Reinvesting REIT dividends can help retirement savers grow their portfolio's investment, and historically steady REIT dividend income can help retirees meet their living expenses. REIT dividends historically have provided: Wealth Accumulation. Reliable Income Returns.
That usually comes in quarterly, semi-annual or annual payments. Shares of public companies that split profits with shareholders by paying cash dividends yield between 2% and 6% a year. With that in mind, putting $250,000 into low-yielding dividend stocks or $83,333 into high-yielding shares will get your $500 a month.
What Is a Good Dividend Yield? Yields from 2% to 6% are generally considered to be a good dividend yield, but there are plenty of factors to consider when deciding if a stock's yield makes it a good investment. Your own investment goals should also play a big role in deciding what a good dividend yield is for you.
To generate $5,000 per month in dividends, you would need a portfolio value of approximately $1 million invested in stocks with an average dividend yield of 5%. For example, Johnson & Johnson stock currently yields 2.7% annually. $1 million invested would generate about $27,000 per year or $2,250 per month.
Let's also be realistic here, $50,000 per year in passive income from dividends requires a substantial portfolio. at an average 5% yield an investor will need $1 million in dividend bearing stocks to create $50K in income yearly.
They pay out all year, making them attractive to those who want regular cash. These companies offer monthly dividends and might often include real estate investment trusts (REITs), business development companies (BDCs) and some dividend-focused mutual or exchange-traded funds (ETFs). These stocks offer a steady income.
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