In our modern society, few things are more powerful or valuable than money. Money is something that everyone needs because it is the universal currency that makes our world turn; if you have enough money, you can buy almost anything.
However, for most people, buying almost anything is out of the question, and usually, people just want to have enough money to live their lives peacefully and comfortably.
Have you ever wondered what earning $500 a month in dividends would be like?
Many people would be delighted to have an extra $500 a month in their revenue stream. Well, this is possible, and you can do it with dividends.
What are dividends? And how exactly can you make $500 a month by investing in them? This article seeks to answer these exact questions, so you don’t have to find out for yourself.
What Are Dividends?
A dividend is a payment made to a company’s shareholders, which comes from the accumulated collective profit and retained earnings. These earnings can be reinvested back into the business, or they can be paid to shareholders as a dividend.
The value of a dividend is often determined on a basis of per-share – so how many shares each account or person holds – that is then paid equally to all shareholders of the same class – i.e., preferred, shared, etc.
The board must approve the dividend payments as a whole of directors. Without their approval, no payments shall be made.
When the dividend is declared, there will also be a date declared – known as the payable date – at which point the dividend will be paid. Typically, the dividend is decided by the amount of profit and the common shares acquired per individual.
For example, most dividend payments will be given between 0.05 cents and $1, so if you have 1000 shares of a company, and they have a dividend payment of 0.30 cents per share, you will receive $300.
Dividends do not always have to be in the form of cash payments. There are multiple ways to hold money and multiple ways to give a dividend payment.
Sometimes it is physical cash, and sometimes, it will give you a stock share of the company; sometimes, it is just an asset of the company; as long as they give something worth that amount of money, it is a dividend.
How To Make $500 A Month In Dividends?
Right now, we know what dividends are, and we can look at trying to make you $500 a month from your stocks. Generally, there are five rules to making money with dividends; let’s explore each of them:
Set A Dividend Yield Target
Dividend yields are the percentage of the total share you will make on a dividend. For example, if the dividend yield is 4%, and you have $100 worth of stock from this one company, then you will be paid, on average, $4 per year.
To make a profit of $500 on dividends, you will want to have a dividend yield of between 3% and 5% at the bare minimum. Anything less than this, and you will not be able to sustain or make it to your goal of $500 a month.
While this changes per country, this general rule of thumb tends to stay the same.
Determine The Amount Of Investment Needed To Achieve That Yield
Working out the number of shares you will need to purchase and how much you can invest is vital to know what your dividend yield will be. Generally, you will invest a lot of money for this small gain.
Something to remember with these dividends is that $500 a month is roughly $6000 a year so we will be using this for our example. If you are sticking to safer stocks that have dividends of 3%, then you will probably need to invest $200,000 to make $6000 a year.
However, if you wanted to take a chance and invest in some riskier stocks with dividends of 5%, then you could make $6000 a year with an investment of $100,000, but the risk is always there.
Choose The Right Stock
It is entirely pointless investing all this money if it isn’t for the right stock that will not pay you a dividend in the first place. As such, you will need actually to buy the right stock for yourself.
First, get a brokerage account with a trusted firm to trade stocks.
Once you have that done, you will need to select a stock that will complement what type of dividend yield you went for. This can be done by researching stocks and seeing what yields you can find for each stock.
Generally, there are two groups you should go after dividend kings – companies that have been paying positive dividends for at least 50 years consecutively – and dividend aristocrats – companies that have been giving positive dividends for at least 25 years consecutively.
Invest Regularly And Consistently
The only way to keep your stock portfolio chugging towards its goal is to constantly check it, invest in it, and do so consistently. Much like any other revenue stream, you will need to manage it.
There are very, very few stock portfolios that don’t have consistent management, either by a person or company, and yours will be no different.
This will also help you avoid sudden changes in the market that could lose you money, as you can move that money around to avoid this.
Reinvest Dividends
This last one is entirely up to you, but it may help you reach your goal faster. By reinvesting your dividends, you can help to reach your goal faster, as you can now put more money into buying stocks that have been proven to give you more dividends.
This will create even more dividends and thus turn the revenue wheel faster.
Conclusion
Getting $500 a month in dividends is all about patience, practical investment, money, and determination, but it can be done if you keep a cool head.
As a current Mortgage Underwriter with 15 years of experience, I have seen my fair share of money-related issues. Whether that be high levels of debt, not enough credit, or simply a lack of funds - I’ve had clients who fit into these categories.
Here I will share tips, tricks, and experiences on how you can get yourself back in control of your finances.
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