Do you think making $500 a month in dividends is not possible at all? Do you want to know how to achieve that profit each month without vesting much time and energy?
Stay with us as we have thoroughly tried and tested various ways to bag such an amount of profit.
We have also identified the easiest and the shortest route for your success in the stock market.
But before that, let’s clear some of your doubts about earning from dividends.
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How Much Do I Need To Invest To Make $500 A Month In Dividends
There is no exact answer to this question as the total dividend depends on several factors.
First, it is directly dependent on the average dividend yield of your stock. And second, it is dependent on the diversity and current status of your stock portfolio.
According to the common rule, you should stick to those stocks that assure around 3% to 5% dividend yield on average. You can definitely flex your target yield if you have a better risk-taking capacity.
But to make around $500/month on dividends, you should have a portfolio of $200k on average. However, the range lies between $170k and $240k, depending on the type of investment.
How To Make $500 A Month In Dividends: 5-Step Plan
Even if you search how to make $500 a month in dividends on Reddit, it can give you vague results.
But we have tried and tested different strategies to identify the five golden rules of getting the best dividends.
- Set a dividend yield target for your portfolio
- Calculate the amount of investment needed to achieve that yield
- Select the right stock to match your dividend yield target
- Invest steadily and regularly to strengthen your folio
- Reinvest to create a snowballing effect
If you try to profit with just a single stock at a time, it can be pretty hard unless you have beginner’s luck. So, the secret juice of success is all about diversifying your stock profile.
Step 1: Choose Desired Dividend Yield Target For A $500 Month In Dividends
The rule of thumb is to stick to stocks with a dividend yield of around 3% to 5%. Stocks with a history of giving less than 3% dividends will not sustain your goal of earning $500/month.
And the stocks with more than a 5% dividend yield have much higher investment risks in general.
What Is Dividend Yield?
The dividend yield is the percentage of dividend you can earn on total investment.
Suppose you have a stock that costs $100/share. And for each of those stocks, the company pays you $4 per year on average as a dividend.
So, your dividend yield per year will be 4%. You need the correct dividend yield of your stocks to gain profit. And it is true for every country.
Even if you want to know how to get a dividend every month in India, the general rule is to stick to more than a 3% dividend yield.
Step 2: Determine How Much You Can Save And Invest To Make $500 A Month In Dividends
It is not easy to make $500 a month in dividends if you don’t have the right plan.
But to start with, you need to rightly assess your investment goals. Besides, you should also adjust your dividend yield target depending on your total investment.
Suppose you want to stay on the safer side and stick to stocks that give a 3% dividend. So, you’ll need to invest at least $200k to get $6k/year in dividends.
On the other hand, if you are a risk-taker, you can go with penny stocks that give even 6% dividends. And with those stocks, you need to invest just $100k to bag $6k/year profit just from its dividend.
Calculate Dividend’s Income Portfolio’s Yield
Before looking for the answer to how to make $500 a month in dividends, you should consider understanding the total yield of your portfolio.
And interestingly, there is an easy rule to do that. Suppose one of your stocks now gives 5% dividends while another gives 3%.
Just add up all dividends of your complete portfolio and divide that by the total market value of your current portfolio to get the actual yield of your portfolio.
Calculate The Amount of Money You Need To Invest To Make $500 A Month In Dividends
To attend the $500/per month dividend target, you need to earn at least $6k (12 months x $500) per year as dividends on your current portfolio.
However, the actual amount required to achieve $6k as dividends will vary depending on the dividend yield.
Suppose you have a portfolio that gives around 4% dividends per year on average. So, you’ll need to invest $150k to earn $6k per year from dividends.
Although this method is super simple, you can also use an online or offline dividend calculator for monthly profit reports.
Step 3: Choose Dividend Stocks That Will Achieve Your $500 A Month Dividends Goal
It is not difficult to make $500 a month in dividends if you choose the right dividend stocks in your portfolio. There are a few steps that you need to follow.
First, you need to have a brokerage account to trade stocks. And then, you need to select the right stock that can complement your desired dividend yield goal.
Choose the Right Dividend-Paying Companies
It is easy to get $100 a month in dividends. But if you aim for more than that, you need to select the right stock.
The first way to find the correct stock is to look at the historical data of the company. There are two groups of companies where you can invest.
- Dividend Kings: Companies that are giving positive dividends for at least 50 years straight.
- Dividend Aristocrats: Companies listed in the S&P 500 stock index give positive dividends consecutively for at least 25 years.
However, you can also invest in penny stocks and other companies to diversify your profile. But yes, you need to check the following details.
- The overall health of the company and their future goals
- The current condition of the industry that the company belongs to
- Consistency of their dividend performance
- If their earnings can cover their total dividend payout
Pick Up The Right Dividend Stocks That Meet Your Dividend Yield Profile
You must have already understood that you need to invest in the right stocks to make $500 a month in dividends.
Even after following the steps mentioned above, you also need to understand their current dividend yield to choose the right company.
You can aim for a 4% dividend yield on average. So, it is better to have such companies in your portfolio that deliver around 3.5% to 4.5%.
Know Your Stock Payments Pattern For Monthly Dividends
Get this straight; you need your fruits at infrequent intervals. It is required to have a consistent dividend yield along with the right frequency of the dividend cycle.
So, if you are looking for the solution of how to make $500 a month in dividends in Canada or the USA, the answer lies in selecting the correct stock payment pattern.
Most of the companies listed in the USA typically pay dividends on a quarterly interval. However, there are three separate cycles of dividend payment.
- January – April – July – October
- February – May – August – November
- March – June – September – December
It is better that you diversify your stocks in each of these three cycles.
So, if you want to invest in 6 stocks, select two companies that give dividends in the first cycle, two more from the second cycle, and the last two from the third cycle.
Know-How Many Dividends Are Required To Make $500 In Monthly Dividends?
You can simply invest and forget if you are looking for a good return in the future.
But, if you want to make more than $500 a month in dividends, you can achieve that goal in three different ways.
- 1 Stock with Monthly Dividends: You can invest in companies that provide monthly dividends rather than quarterly or yearly cycles. But yes, your risk profile will be a bit higher.
- 3 Stocks with Quarterly Dividends: As we have discussed earlier, you can choose a single stock from each of the three dividend-payout cycles. And in that way, your risk profile will remain moderate.
- 20 Stocks with Any Dividend Cycle: If you have sufficient investment capacity, go for investing in at least 20 to 25 different stocks. Through this diversification of your portfolio, you can keep the risk profile on the lower side.
If you are a risk-taker or want to diversify your profile, you can also invest in non-USA companies.
Step 4: Invest Regularly And Earn Up To $500 A Month In Dividends
Like anything in life, you need to follow a disciplined rule, even in investment. Your investment should be diverse and systematic to minimize the risk factor.
You can even cross the hurdles of limited knowledge in investment and improper analyses of companies to a certain extent through regular investments.
Make More Money For Your Monthly Dividend Payments Program
First thing first, you need to have money to invest. And to make $500 a month in dividends, you need a lot of that, at least $200k.
So, if you have a regular day job, it will take a significant amount of time to meet that goal. But, you can take three key steps to boost your income significantly.
- Step 1: Invest in yourself and develop money-making skills
- Step 2: Improve your existing skillset to grab a better-paying job
- Step 3: Deliver more values and aim for better ROI if you have your own business
Besides these, you can also choose some of the best second jobs to do from home that can help you to make more money each month.
And if you have entrepreneurial skills, you can also try these six-figure-making business ideas to meet your financial and investment goal.
Save More Money for Your Dividend Income Portfolio
There are four primary avenues in which we spend the most significant chunk of our monthly income.
And if we can save from these four high tickets, we can have more money in your hand for investments.
So, you need to cut down your expenses for,
- House loan, rent, or property lease
- Daily transportation
- Groceries, day-to-day staples, beverages, and dine out
- Holiday outings and leisure activities
Besides cutting down your monthly expenses, you can also boost your income to have more money for investing in different stocks.
There are many legit opportunities for passive income available these days that can increase your revenue.
Even if you don’t want to start a new side hustle for passive income, you can just take part in high-paying online surveys that pay up to $50/survey these days.
Step 5: Reinvest All Dividends To Accelerate Your $500 A Month Dividends Target
Investing and then eating up all the profit from that investment is not the right way to earn more than $500 a month in dividends. Instead, you need to reinvest in profitable dividends to increase your income further.
There are now options available where you can completely automate your reinvestments. You can talk to a brokerage firm and instruct them to reinvest the profit from your portfolio into profitable stocks.
It is better to invest in newer stocks to diversify your profile. However, you can reinvest in your older stocks too.
You can also accumulate your total yearly income from dividends in a bank account. And at the end of the year, you can then reinvest that profit in a new stock or even in your existing portfolio.
Dividend Investing Mistakes To Avoid
Even if we follow these five fundamental rules to make $500 a month in dividends, we can still make mistakes that can block the real potential.
And the most common mistakes are as follows:
Obsessing Over High Dividend Yields
Let’s understand a general rule first; dividend yield percentage is directly related to the risk factor.
On average, the stock that gives 3% dividends has much better stability and lower volatility than the stock that offers 8% dividends.
It is very lucrative to come across such stocks that give up to 12% dividends. But, never fall for that “yield trap” if you don’t have the solid risk-taking ability. Stick to the dividend yield range between 3.5% to 4.5%.
Not Considering The Dividends Payment Ratio
First, you need to understand what a dividend payment ratio is. It is the ratio between the total profit of the company and the total dividend it pays to its stakeholders.
If you find it high or notice that the company is spending almost all the profit on its dividends, stay away! It’s a trap!
A company shouldn’t spend all its profit to pay dividends. A stable company should save funds from the profit to pass through tough days to come.
If a company doesn’t have enough savings for their bad times, you’ll not get profit from that company in the longer term.
Disregarding Low Dividend Yield Stocks
If you want to make $500 a month in dividends, you shouldn’t avoid low dividend yield stocks. And to correctly identify those, you need to understand YOC (Yield on Cost) for your dividend.
It is almost identical to the dividend yield. But, it uses the actual buying price of the stock then the current price.
Suppose you have bought a stock with a dividend yield of 4%. And when this stock achieves 100% growth, you’ll have double the amount of YOC (8%) even if your dividend yield remains 4%.
Paying Too Much For A Dividend
In an over-inflated market, you have a significant chance of overpaying for a stock. The price can be over-exposed even for a company with a healthy dividend yield (around 4%).
It is mainly due to more players targeting that same stock or its stability that attracts new players.
And in both these cases, you need to stay away from that stock until the market or that particular stock stabilizes.
Not circulating your profit from dividends is the biggest mistake if you aim for $500 a month in dividends. As we have already discussed, reinvesting can be done in two ways.
You can either invest in new stocks or can buy more shares of your existing stocks. And in both cases, you’ll have a better chance of profit.
If you are taking a “buy-and-hold” stance for your current portfolio, you should invest your profit from the dividend of your stock to new IPOs and new companies.
And in a shorter period, it is better to invest the profit in existing stock.
Frequently Asked Questions
What is a monthly dividend portfolio?
A monthly dividend portfolio is a kind of investment packet where you get profit as dividends every month.
It is not necessary to have monthly dividends from all the stocks in your portfolio. Instead, you must have dividends from at least a single stock each month.
What stocks pay the highest dividend?
This data changes historically, although a handful of companies gave steady returns in the last decades or so.
So, according to our research, the top 5 most profitable and highest dividend-paying stocks are PepsiCo (PEP), JPMorgan & Chase Co. (JPM), Target Corporation (TGT), Johnson & Johnson (JNJ), and AbbVie (ABBV).
How much money do you need to invest to make $500 a month in dividends?
To make around $500 a month in dividends, you need to invest approximately $200k on average. However, the range lies between $171k and $240k on average this year.
But yes, this investment amount can vary depending on your risk profile and the shares you select.
How much do you need to invest to live off dividends?
According to the recent reports from the Bureau of Labor Statistics, the average expenditure of a US household lies around $60k/year.
So, to make that much money per year from just dividends, you need to invest around $2 Million in total if your stock dividend yield is 3%.
Let’s hum that same statutory warning first; investments are subject to market risk.
So, no investment is absolutely safe until you invest in traditional commodity funds (like gold and silver) and government bonds. So, choose your stocks carefully and according to your risk profile.
Even if you can’t make $500 a month in dividends, there are many ways to earn that money. I myself have earned $7k/month from blogging this year. And you can follow that step too.
So, that’s all for today, folks! Feel free to drop your feedback, and happy investing!
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