If you’re looking to create passive income from investing in a solid dividend stock, there are quite a few things to consider. Of course, the first point of contention is how much can you and should you invest in the first place?
With that in mind, most of your portfolio should be structured with the help of your financial advisor. There should then be a bit left over each month for you to put towards investments, such as a solid dividend stock. And if you have a fair amount to invest from years of savings, then now is a great time.
Consider the market
The first consideration you need to make is looking at the market when deciding on the dividend stock you’re going to buy. This might sound obvious, but you also may misunderstand me. Right now is a bear market that’s likely headed towards a recession. But rather than thinking it’s a poor time to buy, it’s a great time if you find the right dividend stock.
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Of course, you need to consider what could do well or at least survive well enough during a recession if you need the money. If you don’t, what company could create long-term gains by purchasing them today at lower prices?
For me, that means going essential. Whether it’s basic materials, utilities, healthcare, or other essential services, you want to look for companies that will be necessary no matter what happens. That includes during a recession. But here’s a top choice to consider.
Consider this dividend stock
If you want an essential company that’s going to provide you with a solid dividend, then I would look to NorthWest Healthcare Properties (TSX:NWH.UN) as a great long-term option. The company has stable cash flow coming in from the leasing of healthcare properties around the world. It has a 14-year average lease agreement as well as a 97% occupancy rate.
NorthWest stock is also a steal. Shares are down about 40% at the time of writing. You can therefore get a dividend yield at 9.56% — all while it’s trading at 7.38 times earnings!
Now, how much would you need to invest in this dividend stock to create that $400 per month?
Consider the cost
The reason I’m going with NorthWest here is because it’s so darn cheap. That’s in terms of valuation but also cost in general. You can pick it up as of writing at just $8.56 per share. So, let’s now compare what you would pay now compared to what you would have paid at 52-week highs for $400 per month.
COMPANY
RECENT PRICE
NUMBER OF SHARES
DIVIDEND (ANNUAL)
TOTAL PAYOUT (ANNUAL)
FREQUENCY
TOTAL INVESTMENT
NWH.UN — Now
$8.56
6,000
$0.80
$4,800
Monthly
$51,360
NWH.UN — Highs
$14
6,000
$0.80
$4,800
Monthly
$84,000
That’s right; you save over $30,000 if you want to create $400 per month in passive income. Furthermore, this could be cash set aside in your TFSA, meaning it would be all tax free, with plenty left over for other investments.
Again, just make sure most of your investments are put in low-risk, conservative choices that are done alongside the advice of your financial advisor. If so, you’ll be set up for a long life of solid income.
Canada’s inflation rate has skyrocketed to 6.9%, meaning you’re effectively losing money by investing in a GIC, or worse, leaving your money in a so-called “high interest” savings account.
That’s why we’re alerting investors to a high-yield Canadian dividend stock that looks ridiculously cheap right now. Not only does it yield a whopping 7.9%, but it pays monthly!
Here’s the best part: We’re giving this dividend pick away for FREE today.
Fool contributor Amy Legate-Wolfe has positions in NorthWest Healthcare Properties Real Estate Investment Trust. The Motley Fool recommends NorthWest Healthcare Properties Real Estate Investment Trust. The Motley Fool has a disclosure policy.
Buy the index or pick individual stocks for passive income
Right now, the average dividend yield on the S&P/TSX 60 Index is around 3.11%. If you just bought the index, you would need to invest $154,340 to earn an average of $400 per month. Fortunately, you can do even better by picking individual stocks.
With a 10% yield and monthly payout schedule, you can get to $500 a month with only $60,000 invested. That is, $6,000 per year paid on a monthly basis. Unfortunately, most stocks don't have yields anywhere near 10%. Many do have high enough yields to get you to $500 a month with diligent savings, but don't pay monthly.
However, this isn't always the case. If you're looking to generate $300 in super safe monthly dividend income (note the emphasis on "monthly" income), simply invest $43,000, split equally, into the following two ultra-high-yield stocks, which sport an average yield of 8.39%!
In a market that generates a 2% annual yield, you would need to invest $600,000 up front in order to reliably generate $12,000 per year (or $1,000 per month) in dividend payments. How Can You Make $1,000 Per Month In Dividends?
Investing $100 per month, with an average return rate of 10%, will yield $200,000 after 30 years. Due to compound interest, your investment will yield $535,000 after 40 years. These numbers can grow exponentially with an extra $100. If you make a monthly investment of $200, your 30-year yield will be close to $400,000.
$400 monthly is how much per year? If you make $400 per month, your Yearly salary would be $4,800. This result is obtained by multiplying your base salary by the amount of hours, week, and months you work in a year, assuming you work 40 hours a week.
But the truth is you can get a 9.5% yield today--and even more. But even at 9.5%, we're talking about a middle-class income of $4,000 per month on an investment of just a touch over $500K.
If the average dividend yield of your portfolio is 4%, you'd need a substantial investment to generate $3,000 per month. To be precise, you'd need an investment of $900,000. This is calculated as follows: $3,000 X 12 months = $36,000 per year.
By investing $10,0000 in equal parts of Kinder Morgan (NYSE: KMI), 3M (NYSE: MMM), and Clearway Energy (NYSE: CWEN), an investor can expect to receive more than $5,000 in dividend income over the span of seven years. Here's what makes each high-yield dividend stock a great buy now.
Those who are able to save a significant amount beyond their retirement account contributions may be able to generate $200 monthly in interest. “If you have $50,000 in a high-yield savings account offering 5% APY, that's $200 a month right there,” Henry says.
To generate $500 a month in passive income you may need to invest between $83,333 and $250,000, depending on the asset and investment type you select. In addition to yield, you'll want to consider safety, liquidity and convenience when selecting the investments you'll employ to provide monthly passive income.
Stocks in the S&P 500 index currently yield about 1.5% on aggregate. That means, if you have $1 million invested in a mutual fund or exchange-traded fund that tracks the index, you could expect annual dividend income of about $15,000.
Dividends can be classified either as ordinary or qualified. Whereas ordinary dividends are taxable as ordinary income, qualified dividends that meet certain requirements are taxed at lower capital gain rates.
If you start by contributing $1,000 a month to a retirement account at age 30 or younger, your savings could be worth more than $1 million by the time you retire. Here's how much you should expect to have in your account by the time you retire at 67: If you start at 20 years old you should have $2,024,222 saved.
Suppose you're starting from scratch and have no savings. You'd need to invest around $13,000 per month to save a million dollars in five years, assuming a 7% annual rate of return and 3% inflation rate. For a rate of return of 5%, you'd need to save around $14,700 per month.
Introduction: My name is Velia Krajcik, I am a handsome, clean, lucky, gleaming, magnificent, proud, glorious person who loves writing and wants to share my knowledge and understanding with you.
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