Can you live off dividend yield?
But with the right stock portfolio, you can enjoy peace of mind as you live entirely off the dividend payments you earn. It sounds too good to be true – but it's entirely possible, and people around the world are doing it right now. You can too – it just takes a bit of education and the right tools.
Once you have $1 million in assets, you can look seriously at living entirely off the returns of a portfolio. After all, the S&P 500 alone averages 10% returns per year. Setting aside taxes and down-year investment portfolio management, a $1 million index fund could provide $100,000 annually.
Look for $12,000 Per Year in Dividends
To make $1,000 per month in dividends, it's better to think in annual terms. Companies list their average yield on an annual basis, not based on monthly averages. So you can make much more sense of how much you might earn if you build your numbers around annual goals as well.
And if you've got a large portfolio totaling more than $1.1 million, your dividend income could come in around $50,000 per year. By then, there could be other dividend-focused ETFs to choose from.
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.
Even under very dire circ*mstances, there's almost no way that $10 million isn't enough for you to retire at 50. Even if you parked the money in a checking account and didn't use it to generate further returns, you could live on $200,000 a year for 50 years before you ran out.
Retiring at 50 is a great goal to have. If you have $3 million saved, it's likely that you'll be able to retire comfortably. You'll need to factor in your living expenses, inflation and the expected rate of return on your investments.
A well-constructed dividend portfolio could potentially yield anywhere from 2% to 8% per year. This means that to earn $3,000 monthly from dividend stocks, the required initial investment could range from $450,000 to $1.8 million, depending on the yield.
To generate $5,000 per month in dividends, you would need a portfolio value of approximately $1 million invested in stocks with an average dividend yield of 5%. For example, Johnson & Johnson stock currently yields 2.7% annually. $1 million invested would generate about $27,000 per year or $2,250 per month.
Dividend-paying Stocks
Shares of public companies that split profits with shareholders by paying cash dividends yield between 2% and 6% a year. With that in mind, putting $250,000 into low-yielding dividend stocks or $83,333 into high-yielding shares will get your $500 a month.
How much do I need to invest to make $200 a month in dividends?
The first high-octane income stock capable of generating $200 in monthly income from a beginning investment of $27,000 that's split in thirds is retail real estate investment trust (REIT) Realty Income (O 1.46%).
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. Below, I'll reveal how to start building a portfolio that could get you an even bigger income stream than this today.
How Much Money You Need to Retire on Dividends. As a rough rule of thumb, you can multiply the annual dividend income you wish to generate by 22 and by 28 to establish a reasonable range for how much you need to invest to live off dividends.
The latest round of 13Fs, which features trading activity for the December-ended quarter, detailed a handful of moves made by successful billionaire investors in ultra-high-yield dividend stocks. I'm talking about publicly traded companies whose yield is at least four times higher than the benchmark S&P 500.
Living off interest involves relying on what's known as passive income. This implies that your assets generate enough returns to cover your monthly income needs without the need for additional work or income sources. The ideal scenario is to use the interest and returns while preserving the core principal.
Can an investor really get rich from dividends? The short answer is “yes”. With a high savings rate, robust investment returns, and a long enough time horizon, this will lead to surprising wealth in the long run. For many investors who are just starting out, this may seem like an unrealistic pipe dream.
Most people in the U.S. retire with less than $1 million. $500,000 is a healthy nest egg to supplement Social Security and other income sources. Assuming a 4% withdrawal rate, $500,000 could provide $20,000/year of inflation-adjusted income.
Retirement age | Length of time covered by the $200k (assuming a life expectancy of 80 years) |
---|---|
45 | 35 years |
50 | 30 years |
55 | 25 years |
60 | 20 years |
If you have substantial income from sources like a pension and Social Security, an $800,000 portfolio could last for many years. That's especially true if your expenses are low and you don't have significant health care expenses.
1,821,745 Households in the United States Have Investment Portfolios Worth $3,000,000 or More.
How many people have $2000000 in savings?
Per the Federal Reserve about 6% of households have over $2,000,000 in wealth in 2020. Only 9% of Americans make over $100,000/yr. so, it is a relatively small percentage. As for savings, for those over 60, if they have been frugal and saved, they may have over a million dollars.
Putting that much aside could make it easier to live your preferred lifestyle when you retire, without having to worry about running short of money. However, not a huge percentage of retirees end up having that much money. In fact, statistically, around 10% of retirees have $1 million or more in savings.
Stock | Dividend yield | Dividend growth streak |
---|---|---|
Procter & Gamble Co. (PG) | 2.4% | 68 years |
3M Co. (MMM) | 6.5% | 65 years |
Coca-Cola Co. (KO) | 3.3% | 61 years |
Johnson & Johnson (JNJ) | 3.2% | 61 years |
- ARMOUR Residential REIT – 20.7%
- Orchid Island Capital – 17.8%
- AGNC Investment – 14.8%
- Oxford Square Capital – 13.7%
- Ellington Residential Mortgage REIT – 13.2%
- SLR Investment – 11.5%
- PennantPark Floating Rate Capital – 10%
- Main Street Capital – 7%
- Buy US Treasuries. U.S. Treasuries are still paying attractive yields on short-term investments. ...
- Rent Out Your Yard. ...
- Rent Out Your Car. ...
- Rental Real Estate. ...
- Publish an E-Book. ...
- Become an Affiliate. ...
- Sell an Online Course. ...
- Bottom Line.
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