The average family pays AT&T $160 a month for their wireless plan…but what if you could flip that? What if you made it so AT&T would pay you $1000 a month…every month?
In this video, I’ll show you how to do exactly that! I’ll show you how to create dividend income you can live on with seven popular stocks; Microsoft, IBM, Intel, AT&T, Pfizer, JP Morgan and Cisco. I’ll reveal how many shares of each you’ll need to buy and how much to invest to make $1000 a month. Then I’ll show you why you can’t just focus on dividend yield and what to do instead! Stick around and I’ll also reveal three dividend investing tips that will help supercharge your income.
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You know we love us some dividend investing here on the channel. There’s just something about collecting passive income dividends from your favorite stocks.
But how do you turn a handful of stocks into a steady income? For example, according to the Bureau of Labor Statistics, the average family spends about $180 a month eating out with $35 of that for drinks. What if that $1000 monthly check from your shares of Microsoft meant eating out five times as much each month…or a hell of a lot more drinks?
According to American Express, the average cost of a vacation for a family of four is just over $4,500…what if you could go on two more vacations a year…all paid for by shares of IBM?
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In fact, I’ve got to give credit for today’s video to one of you right there in the comments! Adrian wanted to know how many shares of stock to buy for a dividend portfolio I highlighted a few weeks ago!
7 Most Popular Dividend Stocks to Invest to Create $1000 a Month
I’m going to use seven of the most popular dividend stocks as an example for creating that $1000 monthly income and then reveal a danger most investors don’t realize about dividends. Stick around and later I’ll also share those three tricks to super-charge your dividend income!
First up is Microsoft, ticker MSFT, and the dividend yield of just 0.89% is the lowest of the group but I’ll show you why that might not matter when we look at how much to invest for that $1000 income. Microsoft has also grown that dividend by 59% over the last five years, so you know you’ll always be collecting more money per share.
Now each of the dividend stocks I’ll use as examples in today’s video are quarterly payers…sending you a check every three months. You’ll still be able to create that monthly income but it’s going to take a little planning. I’ll link to a video in the description for the best monthly dividend stocks and one video showing you how to get paid every week!
International Business Machines, ticker IBM, has been a dog for nearly a decade but has actually beaten the market this year and the dividend yield of 5% is looking attractive.
I’ll show you how many shares to buy and how much to invest in these seven stocks as an example but I want to get your input on this as well. Which dividend stocks do you want to see highlighted? So, scroll down and let me know in the comments, which are your favorite dividend stocks?
Intel, ticker INTC, is another stock that has been so disappointing over the last few years because this company used to be such a great investment. Surprisingly though, even despite the problems, the company pays out a solid 3.9% dividend yield and has increased the dividend by 34% over the last five years.
Another old school tech stock here but still one of the most popular stocks among investors, Cisco Systems, ticker CSCO, with its 3.4% dividend yield and lock on the IT networking market.
OK, I can’t wait so I’m going to give you that first tip to supercharge your dividends now and it’s to add REITs and BDCs to your portfolio!
REITs, or real estate investment trusts, invest in that classic income investment and get a special tax break for passing on all the profits to investors. That means dividends are much higher than many other stocks. For example, the 3.2% dividend yield on the SPDR REIT ETF, ticker RWR, is twice the average on the broader stock market and you can find REITs with yields of 5% and higher.
BDCs or Business Development Corporations, pay even higher yields. These companies act as lenders to small and mid-sized businesses and pass 90% of profits through to investors. The VanEck BDC Income ETF, ticker BIZD, pays a 9.7% yield…nearly twice the dividend we’ll see in the seven stocks here!
Best yet, many of these stocks pay dividends every month! I put a video together highlighting the seven highest paying monthly stocks…paying an average 10.8% dividend yield, so look for the link to that in the description!
Three more dividend stocks left and I’ll show you how many shares of each. Next is one of my favorite recession-proof stocks, Pfizer, ticker PFE, with its 3.2% dividend and one of the few stocks actually up this year.
You can’t talk dividend investing without talking JP Morgan, ticker JPM, the largest bank in the U.S. and paying a 3.5% yield along with a dividend payment that has grown 75% over the last five years.
The next dividend stock pays the highest yield in the group but first, dividend tip number two, is using the covered call strategy.
This is a great strategy to cash flow any stock, even ones that don’t pay a dividend, but can also help boost your cash on dividend stocks.
For example, Pfizer already pays a solid 3.2% dividend but I can go here to options and by selling another investor the 2024 call options at $60, I can collect $2.96 a share immediately. That’s the premium the other investor pays me for the options. That’s like adding an additional 5.9% dividend over the next 16 months, instantly boosting my cash return.
Now I realize that explanation was about as clear as mud but the covered call strategy is one of my favorite ways to not only cash flow a stock but also lower my risk so I’m going to link to a video detailing it and other options strategies in the description.
I made a 2018 video to warn investors about AT&T, ticker T, and the shares have gone nowhere but down since but the new business focus has me buying the shares. I bought in late December after the spinoff for the 5.9% dividend and rebounding stock price.
How Many Shares of Stock to Make $1,000 a Month?
Here’s how many shares of each of those stocks you would need to produce a $1,000 monthly income and don’t get freaked out here because I’m going to show you a hack to increase your monthly income later. How I found these is, you take that $1000 monthly income and multiply by 12 for the yearly amount. Then you divide that by the dividend yield which gives you how much you need to invest in the stock and divided by the share price gives you the number of shares to buy. So you see, the number of shares you need depends on not only the dividend yield, what percentage cash return you get on each share but also the share price. That’s why you need so many more shares of AT&T at $18 each versus IBM at $132 each.
You can take a step back and use that same idea to get the amount you’d need to invest in each stock to produce the thousand-dollar income. Here you see it’s all about that dividend yield. With the paltry 0.89% yield on shares of Microsoft, you’d need over $1.3 million invested to generate that income. But getting paid nearly 6% on shares of AT&T means you need less than a sixth that amount to earn the same amount.
But even that amount; $200,000 in shares of AT&T or $300,000 in shares of Intel…it’s still way out of reach for investors. How do you earn $1000 a month income and not have to be a millionaire!
The answer is, you can’t just look at the dividends. This table shows the total return for each stock as well as the dividend yield, so the percentage return you make on both the dividend and the price return each year. I’ve included how much you would need to invest if you wanted to make that $1000 income just off dividends but then also the amount to invest if you use the total return and it makes all the difference.
Look at Microsoft, with a return of nearly 32% each year of the last five, instead of $1.3 million, you would have only needed to invest $37,000 to be able to take out that $1000 a month! With the 12% annual return on Pfizer, you could have generated $1000 a month off of less than $100,000 invested, less than a quarter of what you would have needed just relying on dividends.
And I know most of you out there are saying, yeah but I don’t want to sell stock to make that income but it really makes no difference when you think about it. If you take the dividend instead of reinvesting it, you’re taking some of the money that could have been used to grow your portfolio and your portfolio amount stays the same. Well, if you’re only selling your returns then your portfolio amount is going to stay the same in that scenario as well and this way of looking at stocks, harvesting the returns as well as the dividends, is going to open up an income that would otherwise be out of reach for many investors.
That brings us to our third tip to supercharge your dividend stocks…reinvest the dividend for as long as you can!
Folks, the only way anyone reaches the kind of investments they need to make that $1000 a month is through growing their portfolio, adding to it each month and reinvesting those dividends to buy more stock.
Take a look at the difference just five years makes. If you invested $10,000 in shares of JP Morgan in 2017…you’d now have just over $12,000 worth of stock. That’s a decent return for just five years but look at what happens if you reinvest the dividends you receive into more shares. By the end of the five years, you’d have an additional $2100 and that difference is just going to keep growing over time.
Just that five years of reinvesting dividends means you’re collecting an extra $66 in dividends a year and over 20 years, you’ll have thousands more in income and returns!
Check out the Entire Dividend Investing Series