Financial Investing: Monthly Dividend Income

"Patience is bitter, but its fruit is sweet" ~Aristotle

DISCLAIMER: The information in this post is old re: share prices and dividend yields. I'm also not a financial advisor - use this knowledge at your own risk. Some may disagree with this strategy, and that's their right. Please be civil and share your perspectives and exchange ideas, rather than insult one strategy and praise another.

We often speak of "making a good investment" or "return on investment" in our posts. It's become exceedingly popular to describe relationships/modern dating this way. However, this will be about its origin - financially.

Now, this could be in any quality product, such as clothes, fragrances, accessories, hobby supplies, etc. However, as someone with financial investing experience, I'm glad some of James' videos mentioned investments which make your money grow.

Now, ask 20 finance gurus how to do that, and you'll usually get 20 different answers. When I opened my first brokerage account, all they told me was "good luck!" and whisked me out the door. All I had to go on was a binder full of my grandfather's notes to pour through, and outdated books.

Sadly, this is the result of a long legacy of gatekeeping those secrets on a subject that is an easily-tangling web of intimidating amounts of knowledge to absorb while surrounded by the spiders of false hope and sometimes venomous mistakes to learn from.

A lot of the time, many investors don't even know what they're doing (and have way more capital to play with), and the game itself feels like a losing gamble. Especially if you follow your grand/father's advice recommending building money slowly over time (growth).

But, what if you could build growth and passive income?

Sure, there are other and much faster ways to grow income sooner (I believe someone else here, maybe

@Roger Rheault mentioned he takes a different approach), but my preferred method when I don't have the capital to time trading waves, is:

DIVIDEND INVESTING

I speak of course of "dividend investing". Basically, choosing stocks and ETFs (Exchange-Traded Funds; usually a basket of stocks instead of just one) which generate a monthly payout just for owning shares.

Now, this isn't some get-rich-quick scheme (which is why I don't even bother with crypto; though I did get lucky and made $800 in one week back in 2015, but that was after a loss of about $400).

It takes time and a lot invested to generate a decent return (let alone consistent). However, if researched and managed right/regularly, you could make around $100 per month off just $5k invested.

How?

Higher-yielding stocks/ETFs.

Some companies, like Waste Management or Union Pacific have been around a long time, but the problem is, their share prices are in the triple digits, and their yields are only 1%-3%. Whereas there are ETFs like QYLD with a current share price of $16.29, and a yield of 13.68% as of this typing. When I got in around 3 years ago, both values were only half that. So, great example of growth and increasing passive dividend income.

What does that mean?

Say you own 100 shares ($1,857.00). With 100 shares, at 12.33% dividend yield. Now, yield can be misleading, so always look at dividend RATE (in this case, it's $2.29, which is how much you can earn in a year per share). So that's 100 times $2.29 = $229 per year, divided by 12 months, earning you $19.08 per month. Sure, not a whole lot, but better than a 3% yield. It also means my invested amount doubled in value because of the share prices going up in value.

Now, take my previous example; $5k invested across several stocks/ETFs of varying yields (anywhere from 5% to even 90% - yes, some actually pay out that much, like COIN, though that's a synthetic ETF which isn't always reliable/higher risk... a whole other rabbit hole).

Anyway, off that $5k invested, you'll make $100 per month. Following that logic, with $50k invested, you can make around $1k per month. Maybe not exactly rent money, but a nice chunk. Now, imagine $100k invested - gives you $2k per month, $200k = $4k per month, and so on. And, if the share prices grow, along with the dividend yield, that's even more value and work your invested money has done for you.

You hardly need millions, or even one million, to generate decent passive income (though, with $1M invested, you'd be making over $15k per month; though you also have to pay capital gains taxes, but still come out ahead).

You can also reinvest those dividends into your portfolio to grow the money even more. It's often said that after your first $100k, you make money faster because of compounded interest.

The beauty of dividend investing is, while growth over time is nice, it's not the total focus, and you won't have a melt-down every time the share prices drop (well, not as much of a melt-down, anyway). What matters more, in this case, is how many shares you own, because THAT is what you make your money off of.

Sure, sometimes in dire straits, a company/institution will slash dividend rates or go from monthly payouts to quarterly, but not nearly as much or as often as the share price. In which case, you simply reallocate your assets into a more stable stock/ETF.

Usually, the best (most stable and highest-yielding) are REITs (Real Estate Investment Trusts; not just residential, but business, medical, and industrial).

Anyway, it's all a huge rabbit hole that requires a lot of your own research. As with any long-term plan and large return on investment, it takes discipline. Do you instantly blow your money on some designer items, or a new game, or do you remain disciplined and pay YOURSELF back and make your money work for you in a portfolio to make more money while constantly learning more?

I've given you the basic concept here, and shall close this already-too-long post with some links. Feel free to comment and ask questions or share your own experiences.

Public Trading App/Platform

I've also included a video which debunks many myths around living off dividends. Don't fall for the over-simplified click-bait title. That's referencing why a lot of people fail at or walk away from dividend investing. The video substance itself discusses those concepts and how to win at dividend income investing with a middle-of-road strategy.

Two such strategies are as follows:

Dollar-cost averaging (invest the same amount regardless of market fluctuations/NEVER panic-sell/buy - unless it's part of a well-timed strategy and you have the funds to do it/can stomach the risk)
Core portfolio (reliable but lower-yielding stocks/investments; roughly 70%-75% of portfolio) vs satellite portfolio (roughly 20%-25% of portfolio invested toward higher-yielding, yet riskier dividend stocks)

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