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We've Found A New Way To Diversity Your Money.
We will be covering 2 ways to diversify your investment portfolio. Let’s start with…
Option #1.
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Option 2 - Building A Dividend Account
Building a dividend account can be a fantastic way to create a steady, passive income stream. However, it takes strategic planning, patience, and disciplined investing. For those wondering if it’s worth the time and capital, let’s explore what it takes to build a dividend account that generates $1,500 per month and how to select companies that will help meet this goal.
How Much Investment Is Needed to Earn $1,500 Monthly?
To determine the investment amount needed, let's calculate it based on an average dividend yield. The dividend yield is the percentage a company pays out in dividends relative to its share price.
For example, a stock priced at $100 with a dividend payout of $3 per year has a yield of 3%. We can use the dividend calculator, but to keep this time efficient I willl just give you the answers.
For the sake of our calculation, let’s assume an average portfolio yield of 4%. To get to $1,500 per month, or $18,000 annually, we can use the following formula:
So, to generate $1,500 a month at a 4% yield, you’d need an investment of around $450,000. This is a general estimate—yields can vary significantly among different stocks and sectors.
Seems like a lot? 🫠
It's a lot of money to save, but even if you don't reach this goal, putting extra money here can be a good idea. Whether you have $400,000 or $70,000, your money can grow while you sleep.
Tips for Building a Dividend Portfolio
Focus on Dividend Growth Stocks: Companies with a strong history of increasing dividends can boost your income over time without requiring additional investments.
Diversify Across Sectors: Avoid putting all your funds in one industry to reduce risk.
Choose Quality Over High Yields: Extremely high yields may indicate risk. Look for stable companies with manageable or $0 payout ratios (generally below 60-70% for non-REITs).
Reinvest Dividends Initially: Use dividend reinvestment (DRIP) to buy more shares until you’re ready to start drawing income.
Example Portfolio: 10-20 Dividend Stocks
Here’s a list of dividend-paying stocks and funds across various sectors that could form a core dividend portfolio:
Johnson & Johnson (JNJ) - Healthcare - Yield: ~3%
Procter & Gamble (PG) - Consumer Staples - Yield: ~2.5%
PepsiCo (PEP) - Consumer Staples - Yield: ~2.9%
Coca-Cola (KO) - Consumer Staples - Yield: ~3.2%
3M Company (MMM) - Industrials - Yield: ~5.7%
Realty Income (O) - Real Estate (REIT) - Yield: ~5%
AT&T (T) - Telecommunications - Yield: ~7% (be cautious as high yields can indicate higher risk)
Exxon Mobil (XOM) - Energy - Yield: ~4%
Chevron (CVX) - Energy - Yield: ~3.8%
Verizon (VZ) - Telecommunications - Yield: ~7.5%
Apple (AAPL) - Technology - Yield: ~0.5% (although low, Apple has steady growth and dividend increases)
Microsoft (MSFT) - Technology - Yield: ~0.8%
AbbVie (ABBV) - Healthcare - Yield: ~4.6%
Pfizer (PFE) - Healthcare - Yield: ~4%
Home Depot (HD) - Consumer Discretionary - Yield: ~2.6%
Union Pacific (UNP) - Industrials - Yield: ~2.4%
American Electric Power (AEP) - Utilities - Yield: ~3.5%
Southern Company (SO) - Utilities - Yield: ~4%
Bank of America (BAC) - Financials - Yield: ~2.9%
Vanguard High Dividend Yield ETF (VYM) - ETF - Yield: ~3%
This portfolio combines a mix of dividend aristocrats (companies with a long history of dividend growth), stable utilities, and real estate investments to capture diversified sources of passive income.
Final Thoughts
Building a dividend account to generate $1,500 per month requires an upfront investment or a disciplined approach with smaller, consistent contributions over time. Diversifying across stable, dividend-growing companies can create a resilient income stream. Remember to consider your risk tolerance and financial goals, as dividend investing—like all investment strategies—requires thoughtful planning and patience.
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