How I Made $100/Month of Passive Income with Stock Dividends without Breaking the Bank
Warren Buffett once said, “If you don’t find a way to make money while you sleep, you will work until you die.”
One of the simple ways to make money when we sleep is investing in dividend stocks.
Over the last few months, I started analyzing and purchasing stocks with high dividends.
The ultimate goal was to have a constant monthly passive income, so I started analyzing dozens and dozens of videos and websites.
The Strategy
Looking for Monthly Dividend:
My portfolio is made of high dividend stocks that pay monthly dividends. I’m not looking for growth dividends (dividends that increase over time). However, even though I don’t look for grow dividends, some of them increase a lot (some of them grow +30% in a few months).
Most of the investments are in REIT (real estate investment trust) or ETF (exchange-traded fund) stocks.
REIT stocks typically provide high dividends plus the potential for moderate, long-term capital appreciation. Long-term total returns of REIT stocks tend to be similar to those of value stocks and more than the returns of lower-risk bonds.
An ETF is a type of fund that holds multiple underlying assets, rather than only one like a stock. Because there are multiple assets within an ETF, they can be a popular choice for diversification. An ETF can own hundreds or thousands of stocks across various industries, or it could be isolated to one particular industry or sector.
Start Small:
I started purchasing a few hundred dollars every week and using the monthly dividends to purchase more stocks.
Diversify:
I purchased several stocks to avoid that one stock can damage my monthly revenue.
Look for cheap or underappreciated stocks:
Also, I’m not looking for “safe dividend” income with the high cost and low dividends, such as Johnson & Johnson (Ticker: JNJ) that cost $165.69/each stock.
My investment model is based on the “The Intelligent Investor” book idea of looking for underappreciated stocks (below $25/each).
Safe Stocks
Here’s an example: Most inventors in REIT stocks recommend Realty Income (Ticker: O) or Main Street Capital (Ticker: MAIN) as safe bets on REIT.
The current value of O on February 17, 2021, is $61,70 and pays a dividend of $2.814/year. So, if I want to make $100/month or $1,200/year, I need to invest $26,311.
To calculate this I will use this formula:
(Total Yearly Income Desired / Total Yearly Dividend) * Cost of Stock
(1200 / 2.814) * 61.70 = $ 26,311
So if we invest $ 26,311, we will receive around $100/month or $1,200/year.
I can see two problems with this stock: one it is expensive, the second one it is required a lot of money to achieve our goal of $100/month.
Still is much better than a saving account payoff.
Growing Stocks
I can see lots of people talking about dividend portfolios on YouTube investing in Apple (Ticker: APPL). Apple is a phenomenal growing stock but is not a good option for dividends.
Now let make some numbers with an excellent growth dividend like Apple, using the same formula:
(Total Yearly Income Desired / Total Yearly Dividend) * Cost of Stock
(1200 / 0.82) * 132.24 = $193,522
So, we will need to invest almost $200,000 to make $100/month or a $1,200/year in dividend with Apple!
High Dividend Stocks
Now we are going to compare with two of my favorites stocks:
The first one is one ETF, InfraCap Active MLP (Ticker: AMZA), the current dividend is $3.24 and the current stock cost is $22.47/each.
Using the formula (Total Yearly Income Desired / Total Yearly Dividend) * Cost of Stock, I just need $ 8,322 to generate $1,200/year or $100/month and the current stock price.
(1200 / 3.24) * 22.47 = $ 8,322
And we can see that the investment in AMZA is not just a dividend. As you can see, the stock also grew almost 30% in the last 3 months).
In this particular case, I have a return of almost $238 since I purchase the stock a few months ago.
The second one is a REIT stock: Orchid Island Capital (Ticker: ORC), the current dividend is $0.78/year and the current stock cost is $5.73/each.
So, let make numbers:
(1200 / 0.78) * 5.73 = $8,815
My portfolio
And here is my portfolio, with high-dividend stocks that help me to achieve my goal of $100/Month or $1,200/Year of passive income in February 2021:
I invested $5,944.62 to achieve my goal, but also I made another $1000 extra with the growth of my investment over the last few months.
And that’s all folks. If you liked this story, please show your support by 👏 this story. Thank you for reading!
DISCLAIMER: I’m just a guy obsessed with stock dividends, so do your own research! I’m is not a licensed financial advisor. The information presented should not be construed as financial or legal advice. Always do your own due diligence. Don’t trust on random people on Medium, Reddit or YouTube for financial advice.