If you’re looking to create passive income from investing in a solid dividend stock, there are quite a few things to consider. Of course, the first point of contention is how much can you and should you invest in the first place?
With that in mind, most of your portfolio should be structured with the help of your financial advisor. There should then be a bit left over each month for you to put towards investments, such as a solid dividend stock. And if you have a fair amount to invest from years of savings, then now is a great time.
Consider the market
The first consideration you need to make is looking at the market when deciding on the dividend stock you’re going to buy. This might sound obvious, but you also may misunderstand me. Right now is a bear market that’s likely headed towards a recession. But rather than thinking it’s a poor time to buy, it’s a great time if you find the right dividend stock.
ADVERTIsem*nT
Of course, you need to consider what could do well or at least survive well enough during a recession if you need the money. If you don’t, what company could create long-term gains by purchasing them today at lower prices?
For me, that means going essential. Whether it’s basic materials, utilities, healthcare, or other essential services, you want to look for companies that will be necessary no matter what happens. That includes during a recession. But here’s a top choice to consider.
Consider this dividend stock
If you want an essential company that’s going to provide you with a solid dividend, then I would look to NorthWest Healthcare Properties (TSX:NWH.UN) as a great long-term option. The company has stable cash flow coming in from the leasing of healthcare properties around the world. It has a 14-year average lease agreement as well as a 97% occupancy rate.
NorthWest stock is also a steal. Shares are down about 40% at the time of writing. You can therefore get a dividend yield at 9.56% — all while it’s trading at 7.38 times earnings!
Now, how much would you need to invest in this dividend stock to create that $400 per month?
Consider the cost
The reason I’m going with NorthWest here is because it’s so darn cheap. That’s in terms of valuation but also cost in general. You can pick it up as of writing at just $8.56 per share. So, let’s now compare what you would pay now compared to what you would have paid at 52-week highs for $400 per month.
COMPANY
RECENT PRICE
NUMBER OF SHARES
DIVIDEND (ANNUAL)
TOTAL PAYOUT (ANNUAL)
FREQUENCY
TOTAL INVESTMENT
NWH.UN — Now
$8.56
6,000
$0.80
$4,800
Monthly
$51,360
NWH.UN — Highs
$14
6,000
$0.80
$4,800
Monthly
$84,000
That’s right; you save over $30,000 if you want to create $400 per month in passive income. Furthermore, this could be cash set aside in your TFSA, meaning it would be all tax free, with plenty left over for other investments.
Again, just make sure most of your investments are put in low-risk, conservative choices that are done alongside the advice of your financial advisor. If so, you’ll be set up for a long life of solid income.
Canada’s inflation rate has skyrocketed to 6.9%, meaning you’re effectively losing money by investing in a GIC, or worse, leaving your money in a so-called “high interest” savings account.
That’s why we’re alerting investors to a high-yield Canadian dividend stock that looks ridiculously cheap right now. Not only does it yield a whopping 7.9%, but it pays monthly!
Here’s the best part: We’re giving this dividend pick away for FREE today.
Fool contributor Amy Legate-Wolfe has positions in NorthWest Healthcare Properties Real Estate Investment Trust. The Motley Fool recommends NorthWest Healthcare Properties Real Estate Investment Trust. The Motley Fool has a disclosure policy.
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?
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%!
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.
If you just bought the index, you would need to invest $154,340 to earn an average of $400 per month. Fortunately, you can do even better by picking individual stocks. In fact, with a hypothetical three-stock portfolio, you could invest only $90,000 (41% less cash than above) and earn around $440 per month.
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.
If the average dividend yield of your portfolio is 4%, you'd need a substantial investment to generate $3,000 per month. To be precise, you'd need an investment of $900,000. This is calculated as follows: $3,000 X 12 months = $36,000 per year.
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. Below, I'll reveal how to start building a portfolio that could get you an even bigger income stream than this today.
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.
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.
The S&P 500 is an index, so it does not pay dividends; however, there are mutual funds and exchange-traded funds (ETFs) that track the index, which you can invest in. If the companies in these funds pay dividends, you'll receive yours based on how many shares of the funds you hold.
Answer and Explanation: The amount of $100,000 will grow to $432,194.24 after 30 years at a 5% annual return. The amount of $100,000 will grow to $1,006,265.69 after 30 years at an 8% annual return.
Historically, a diversified stock portfolio has earned an average of 10%. But even if you only got 7%, by investing $400 a month for 40 years, you'd have over $1 million to spend in retirement. A good rule of thumb is to invest a minimum of 10% to 15% of your gross income for retirement.
For example, if you are able to commit to investing $500 a month in an S&P 500 index fund like the Vanguard 500 Fund (NYSEMKT: VOO), you'll eventually have $1 million, and that includes paying the 0.03% expense ratio in the ETF, meaning you'll pay 3 cents each year for every $100 you have invested in the index fund.
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.
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