how much invested to make 1000 a month in dividends
Dividends are the bread and butter of income investors. You don’t need to sell your assets or spend hours every day managing your accounts. Instead, dividend stocks simply generate income on their own. Putting together a portfolio that generates at least $1,000 in dividends each month takes some work, though. Here’s how to go about it.
For more help generating sufficient income through your investments, consider working with a financial advisor.
What Are Dividends?
Dividends are payments that a company makes to its shareholders. For example, say ABC Corp. issues a dividend of $0.50 per share. Someone who holds 1,000 shares of this stock would receive a check for $500.00.
Typically a company will issue these payments based on its profits. When it has made a lot of money, it will distribute some of that among its shareholders.
Companies do not have to pay dividends, although most do. Depending on the size of the firm, anywhere from 54% to 84% of companies issue dividend payments at least from time to time.
There is no legally mandated timetable for companies to make dividend payments. When a company does so is entirely at its own discretion, though members of a class of stocks known as “dividend aristocrats” tend to issue them on a regular schedule. Most payments are issued a quarterly basis.
Capital Needed for Dividend Investing
how much invested to make 1000 a month in dividends
The No. 1 question people ask when it comes to income investing is, “How much will I need to meet my goals?” This is an excellent question. Unfortunately, the number can be pretty big.
Now, there’s no fixed amount of money you need to invest for dividends. It all depends on the yield of your investments, so understanding “yield” is pretty essential to understanding dividend investing. (Note that the definition below is how “yield” applies to stock dividends. In general, yield defines how much money an investment makes when you hold it rather than selling it.)
Yield is the amount that a stock pays in dividends per share based on that stock’s price per share. So, for example, say that ABC Corp. costs $100 per share. Let’s also say that the company pays an annual dividend of $5. This stock’s yield would be:
$5 / $100 = 0.05
This is a 5% yield. If you invest $100 into this stock, you will make $5 each year in dividends. By market standards, that’s quite good.
At time of writing, the S&P 500 paid an average yield of 1.37%. This means that across the market, on average investors receive back dividend payments worth about 1.37% of their initial investments. Fortunately, that’s lower than historic standards. Ordinarily the S&P 500 tends to have an average yield of around 2%.
So where does that leave us?
Let’s return to our formula. We want to make $12,000 per year on average in a market that pays approximately 2% in yield each year. This gives us the following formula:
$12,000 / X = 0.02
Solving for X, we get $600,000.
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?
how much invested to make 1000 a month in dividends
Here are the steps you can take to build yourself a sufficient dividend portfolio.
Look for $12,000 Per Year in Dividends
To make $1,000 per month in dividends, it’s better to think in annual terms. Companies list their average yield on an annual basis, not based on monthly averages. So you can make much more sense of how much you might earn if you build your numbers around annual goals as well.
So that’s the place to start. You’re looking to make $12,000 per year in dividends.
Find Dividend-Paying Stocks
The next step is to look for stocks that reliably pay dividends. Not every company issues a dividend payment, and of those not all of them are consistent.
You’re not looking for an occasional windfall. You want to companies with a history of making regular payments on a regular schedule. To do this, research stocks that have a strong history of making payments. The more consistent a company has been with its dividends in the past, the more likely it will continue to be in the future.
Look for Strong but Sustainable Yields
Remember, yield is the ratio of dividend payment to share price for any given stock. When you look at a stock’s yield, you want to balance two concerns.
On the one hand, strong yields mean that the stock pays more money relative to its share price. This is generally a good thing. If one stock has a yield of 3% and another has a yield of 1.5%, you will make more money per dollar invested in the former than the latter.
However, when a stock’s yield is too strong, that can be a sign of trouble. An unusually high yield can indicate that the stock’s price has recently fallen. Investors aren’t getting more money; in fact, capital gains investors are losing money. It can also indicate that the company is spending its money poorly, blowing the operating budget on shareholder value. Either of these issues (or others) signal that this company’s dividend payments may not be sustainable.
A good rule of thumb is to look for dividend payments that are strong, but not abnormally strong relative to the market overall. In recent history, the market has averaged around 2% yield per year. If you see a yield of 3% or 3.5%, that might be a great investment. If you see a yield of 5%, you might want to dig a little deeper.
Don’t miss out on news that could impact your finances. Get news and tips to make smarter financial decisions with SmartAsset’s semi-weekly email. It’s 100% free and you can unsubscribe at any time. Sign up today.
Start With Large Companies and ETFs
Generally speaking you can expect the best yield from larger, older companies. Historically firms listed on the S&P 500 tend to be the most likely to issue regular dividend payments, and they also tend to issue the largest dividend payments per-share.
You can also start by investing in dividend-oriented exchange-traded funds (ETFs). This has become an increasingly popular area for ETFs, and you can find many that are organized entirely around investing in stocks that make dividend payments. Often you can save yourself a lot of trouble by seeking out one ETF with strong historic performance instead of a portfolio of different stocks.
Reinvest Your Payments
The truth is that most investors won’t have the money to generate $1,000 per month in dividends; not at first, anyway. Even if you find a market-beating series of investments that average 3% annual yield, you would still need $400,000 in up-front capital to hit your targets.
And that’s okay. You don’t need to get there all at once. Instead, patiently reinvest your dividends as they come in the door. This will create compound returns, in which your payments then start generating their own payments. Over time you’ll find that your investment portfolio’s base capital can, indeed, grow to hit your target.
The Bottom Line
Making $1,000 per month in dividends will take patient investing – whether you’re buying stocks or funds – or a lot of up-front capital. But with the right mix of yield and patience, you can get there.
Dividend Investing Tips
You can never know too much about your investments. If you want to start pursuing dividend investing, take our crash course in how to calculate dividend yield. It’s an eye-opener.
A financial advisor will help you build a strong dividend portfolio. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Photo credit: ©iStock.com/PeopleImages, ©iStock.com/courtneyk, ©iStock.com/insta_photos
Dividends are one of the best benefits to being a shareholder, but finding a great dividend stock is no easy task. Does OceanFirst Financial (OCFC) have what it takes? Let’s find out.
Making investments pay out for the long term is the true challenge in today’s market environment. The series of headwinds piling up – from persistently high inflation to rising interest rates to slowing demand to bureaucratic bloat – are rising to hurricane force, and renewing investors’ attention to defensive stocks. It’s only logical. The classic defensive stock, the dividend payer, ensures an income stream no matter how the markets move, and if the yield is high enough, these stocks can also
Most retired workers depend on multiple streams of income during their retirement. Two of the most common such income streams are Social Security and pensions. If we look at pension vs. Social Security income, we find significant differences. Retired workers … Continue reading → The post Pension vs. Social Security: Key Differences appeared first on SmartAsset Blog.
Will I outlive my retirement savings? This question dogs many retirement savers who view their accounts, often far shy of $1 million, with dread and fear. After all, aspiring retirees have to plan for longer lifespans, potentially steep medical costs … Continue reading → The post This Chart Shows You How Many Years an Extra $100K Buys You in Retirement appeared first on SmartAsset Blog.
Ray Dalio Says There’s a ‘Perfect Storm’ Brewing; Here Are 2 High-Yield Dividend Stocks to Protect Your Portfolio
The headwinds have piled up for the US economy, and today’s producer price index, coming in well above the forecasts, was just the latest blow. As the PPI reminds us, inflation is stubbornly high, and compounding on last year’s elevated numbers. In addition, we’re facing a 1H GDP contraction, a nosedive in consumer confidence, shaky supplies chains, and the Federal Reserve’s rapid shift to hiking interest rates. And all of that may just be the tip of the iceberg. Billionaire investor Ray Dalio s
For older Americans, living off the interest and returns of your retirement account is how retirement is structured. The goal is that by the time you hit your late 60s you will ideally have enough saved up to coast indefinitely. … Continue reading → The post How Much Interest Does $2 Million Pay Monthly? appeared first on SmartAsset Blog.
Almost everyone has dreamt of hitting the lottery and played the “What would you do?” game. It’s fun to imagine hitting it big, and every year millions of Americans buy lottery tickets every week, leaving their pursuit of wealth up to fate. Some, however, take their financial futures into their own hands and scour data, press releases and every crevice of the internet for a piece of information that may lead to riches. Netflix Inc. recently released “Eat The Rich,” a documentary outlining GameSt
J.P. Morgan Asset Management wants you to rethink how you will pay for retirement. The multinational investment bank says retirement investors should secure enough guaranteed income from pensions, annuities and Social Security to pay for basic living expenses. These include … Continue reading → The post J.P. Morgan Recommends This Guaranteed Funding Strategy to Cover Expenses appeared first on SmartAsset Blog.
These are the types of companies Warren Buffett says you should invest in during times of high inflation
MarketWatch Picks has highlighted these products and services because we think readers will find them useful; the MarketWatch News staff is not involved in creating this content. And at a 2009 shareholder meeting, Buffett noted that the first best thing you can do to protect against inflation is to invest in yourself and your skills: “If you’re the best teacher, if you’re the best surgeon, if you’re the best lawyer, you will get your share of the national economic pie regardless of the value of whatever the currency may be,” he said.
Almost half of baby boomers and more than one-third of Generation X expect to work past age 70 or do not plan to retire at all, highlighting the need for backup plans in case life’s unexpected events get in the way of such goals. According to a study by nonprofit Transamerica Center for Retirement Studies in collaboration with the Transamerica Institute, 49% of baby boomers expect to, or already have, extended their working lives past 70 or do not plan to retire. Collinson pointed out that most people retire sooner than they had planned, with the majority retiring before age 65 due to employment-related reasons, their health or the health of a loved one.
Last month, the Federal Reserve implemented its fifth straight interest rate hike this year, and its third consecutive hike at 75 basis points, bringing its key funds rate up to the 3% to 3.25% range. The move showed that the central bank is deadly serious about taking on the stubbornly high inflation that has been plaguing the economy since the middle of 2021. The Fed’s turn toward an aggressive anti-inflationary policy may not be hard enough, however, as the September data, released this morni
With 2021 coming to a close, T. Rowe Price says there are several moves that people saving for retirement should make by the end of the year. The investment management giant says harvesting losses for tax purposes, reassessing your asset allocation … Continue reading → The post Saving for Retirement? Investment Giant Says Make These 3 Moves By Years End appeared first on SmartAsset Blog.
Bear markets are painful to experience. Two consumer stocks you should consider now are Coupang (NYSE: CPNG) and Revolve Group (NYSE: RVLV) during the 2022 bear market. Coupang went public in early 2021 in a massive initial public offering (IPO), raising $4.6 billion from investors and debuting at a market cap of $84 billion.
Shares of Plug Power Inc. sank 7.0% in premarket trading Friday, after the hydrogen and fuel cell systems company said 2022 revenue could be 5% to 10% below previous guidance, as some larger projects could potentially be completed in 2023 rather than 2022. From the midpoint of the previous 2022 revenue guidance of $900 million to $925 million, a 5%-to-10% decline would be about $821.25 million to $866.88 million, while the current FactSet revenue consensus is $919.1 million. The company said tha
The Japanese currency is not far off ¥150 to the U.S. dollar, with another surge based on the discrepancy between tame price changes at home and rampant U.S. inflation.
(Reuters) -Singapore Airlines Ltd (SIA) said on Thursday it was in talks with India’s Tata Group about a potential merger of Vistara, their joint venture airline, with Air India to give the Singaporean carrier a bigger foothold in South Asia. “The discussions seek to deepen the existing partnership between SIA and Tata, and may include a potential integration of Vistara and Air India,” SIA said in a statement.