Now I know that many of you (myself included) is not quite in the position to make $1000 per month using stock dividends since the amount of capital required can be quite substantial. However, it is still important to read and digest this information, tucking it away for future reference. There may very well come a day when you need this knowledge such as during retirement when you are trying to balance risk with the possibility of outliving your money.
Before we actually get into the “how” portion of the article, let’s figure out how much capital we are talking about. Making $1000 per month with dividends means that we are making $12,000 per year. Assuming a 4% dividend rate, we would need $300,000 in dividend paying stocks to generate that kind of income. But don’t say there is no way I would ever have that much. A couple saving $10,000 for 30 years under a mattress should have that much. If you are contributing the maximum to a 401(k), then you are able to put away $17,000 for 2012. You don’t even have to maximally fund a 401(k) for 30 years and you can amass a decent stock portfolio.
So how are you going to turn those stocks into livable income? With dividends, of course!
Getting a Monthly Income
Now there are some stocks which pay a monthly dividend. Many of them are closed-end trusts that invest in energy or real estate. However, there is one stock with which I am familiar that pays monthly, and that is Goldcorp (GG). It is a Canadian gold mining company. I owned it in my retirement account for a while before I decided to go with a different company.
But there is a way to get monthly dividend checks with companies that pay quarterly if you spread out your investments among several different companies paying at separate times. For example, Pepsico (PEP) pays a dividend in January, March, June, and September and yields just over 3%. Intel (INTC) pays in March, June, September, and December and yields just over 3% as well. Coca-cola pays in April, July, October, and December.
In fact, I had managed to put together a sample portfolio consisting of five companies which could cover every month of the year. Some months got extra dividends because some companies don’t pay at precisely 3 month intervals. I suspect it has to do with the end of the fiscal year. Those five companies were Walmart, Coca-cola, Microsoft, JP Morgan Chase, and Verizon. You can play around with your own combination to see what you can come up with.
It takes some work but is possible to divide your funds among different companies that will pay out in different months. With just Pepsi and Coke, you can receive checks in 8 of the 12 months of the year.
Of course, it would be easier to simply pick the dividend stocks in which you wish to invest, take the funds whenever they occur during the quarter, and budget out your $1000 monthly yourself.
As mentioned, the one downside to this method of income is that it takes a substantial amount of money to invest. Rather than spending a lot of time working to develop and establish the income, it takes cash. So if you have the cash to do this, great. If not, there are plenty of other ideas on the site which can help you make an extra $1000 per month which would eventually give you the cash needed to move to a more passive form of generating monthly income.
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