Can I Make $1,000 Bucks Every Month in Dividends? (2024)

Can I Make $1,000 Bucks Every Month in Dividends? (1)

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

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?

Can I Make $1,000 Bucks Every Month in Dividends? (3)

Here are the steps you can take to build yourself a sufficient dividend portfolio.

If you’re ready to be matched with local advisors that can help you achieve your financial goals, get started now.

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.

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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.

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The post How to Make $1,000 a Month in Dividends appeared first on SmartAsset Blog.

Can I Make $1,000 Bucks Every Month in Dividends? (2024)

FAQs

Can I Make $1,000 Bucks Every Month in Dividends? ›

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.

How much can you realistically make with dividends? ›

The average dividend yield on S&P 500 index companies that pay a dividend historically fluctuates somewhere between 2% and 5%, depending on market conditions. 7 In general, it pays to do your homework on stocks yielding more than 8% to find out what is truly going on with the company.

How much do I need to invest to make $3000 a month in dividends? ›

If you were to invest in a company offering a 4% annual dividend yield, you would need to invest about $900,000 to generate a monthly income of $3000. While this might seem like a hefty sum, remember that this investment isn't just generating income—it's also likely to appreciate over time.

How much do I need to invest to make $500 a month in dividends? ›

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.

Can you live off of dividend income? ›

It is possible to achieve financial freedom by living off dividends forever. That isn't to say it's easy, but it's possible. Those starting from nothing admittedly have a hard road to retirement-enabling passive income.

Are monthly dividends worth it? ›

Monthly dividends can be reliable source of income and act as a safeguard against inflation. Stock market investors appreciate dividends. Dividends provide cash flow and enhance total returns. They allow investors to participate directly in the revenue and earnings of the companies in their portfolios.

What is the highest paying dividend stock that pays monthly? ›

Top 10 Highest-Yielding Monthly Dividend Stocks in 2022
  • ARMOUR Residential REIT – 20.7%
  • Orchid Island Capital – 17.8%
  • AGNC Investment – 14.8%
  • Oxford Square Capital – 13.7%
  • Ellington Residential Mortgage REIT – 13.2%
  • SLR Investment – 11.5%
  • PennantPark Floating Rate Capital – 10%
  • Main Street Capital – 7%

What are the six dividend stocks to buy and hold forever? ›

7 Dividend Kings to Buy and Hold Forever
StockDividend yieldDividend growth streak
Procter & Gamble Co. (PG)2.4%68 years
3M Co. (MMM)6.5%65 years
Coca-Cola Co. (KO)3.3%61 years
Johnson & Johnson (JNJ)3.2%61 years
3 more rows
Apr 11, 2024

What stock pays dividends monthly? ›

Compare the best monthly dividend companies
COMPANYSECTORMARKET CAP
Prospect Capital (PSEC)Financial services$ 2.6 billion
Paramount Resources (POU.TO)Energy$3.1 billion
Gladstone Investment (GAIN)Financial services$439 million
LTC Properties (LTC)Real estate$ 1.3 billion
1 more row
Feb 13, 2024

How to make 5k a month in dividends? ›

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.

How much money do I need to invest to live off dividends? ›

How Much Money You Need to Retire on Dividends. As a rough rule of thumb, you can multiply the annual dividend income you wish to generate by 22 and by 28 to establish a reasonable range for how much you need to invest to live off dividends.

How much dividend stock do I need to make $1000 a month? ›

To have a perfect portfolio to generate $1000/month in dividends, one should have at least 30 stocks in at least 10 different sectors. No stock should not be more than 3.33% of your portfolio. If each stock generates around $400 in dividend income per year, 30 of each will generate $12,000 a year or $1000/month.

How do you make passive income from dividends? ›

Dividend stocks

Dividends are paid per share of stock, so the more shares you own, the higher your payout. Opportunity: Since the income from the stocks isn't related to any activity other than the initial financial investment, owning dividend-yielding stocks can be one of the most passive forms of making money.

What are the top dividend stocks? ›

9 Highest Dividend-Paying Stocks in the S&P 500
StockTrailing annual dividend yield*
AT&T Inc. (T)6.3%
Verizon Communications Inc. (VZ)6.3%
Healthpeak Properties Inc. (DOC)6.6%
Altria Group Inc. (MO)8.8%
5 more rows
Mar 29, 2024

How much invested to make $1,000 a year in dividends? ›

And if you pick companies with attractive yields, the income can really add up as you grow your portfolio. For example, investing $15,000 evenly across these five high-quality, high-yielding dividend stocks would, at their current payout rates, generate almost $1,000 of annual dividend income.

How much money do you need to make $50000 a year off dividends? ›

This broader mix of stocks offers higher payouts and greater diversification than what you'll get with the Invesco QQQ Trust. And if you've got a large portfolio totaling more than $1.1 million, your dividend income could come in around $50,000 per year.

How much can you make in dividends with $1 million dollars? ›

Stocks in the S&P 500 index currently yield about 1.5% on aggregate. That means, if you have $1 million invested in a mutual fund or exchange-traded fund that tracks the index, you could expect annual dividend income of about $15,000.

How much do I need to invest to make 1000 a year in dividends? ›

At recent prices, they offer an average yield of 8.4%. Image source: Getty Images. About $11,900 spread evenly among these stocks is enough to secure $1,000 in annual dividend income. Moreover, there's a good chance they will be able to raise their dividend payments, and your income stream, for many years to come.

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