How much does someone need to invest in order to receive $5,000 per month in dividend income (or $60,000 annually in dividends)? Today’s video explores a variety of different scenarios because there is not a single answer. More than anything, I introduce the concept of true dividend yield-on-cost, a powerful strategy that can help greatly reduce the amount of capital required to reach one’s passive income goals.
#dividend #yield #passiveincome
Timestamps:
0:00 INTRODUCTION: $5,000 Per Month In True Dividend Passive Income
0:38 HOW MUCH DO I NEED TO INVEST TO RECEIVE $5,000 PER MONTH?
1:00 Scenario 1: About $700,000 invested if the income is needed immediately.
1:50 Scenario 2: About $200,000 invested, and then wait about 15 years.
2:08 DIVIDEND YIELD ON COST
2:20 Four Pillars of Dividend Yield On Cost
2:46 SCENARIO 1: IMMEDIATE CASH FLOW ($5,000 PER MONTH)
3:32 Formula Indicating How Much To Invest
3:51 SCHD, a lower-risk option
4:20 $1,764,705.88 is required for the lower-risk investor, for someone who needs $5,000/month immediately
5:25 SCENARIO 1B: High-yield, higher-risk option
6:13 Formula (now divides by 8.4%)
6:26 $714,285.71 is required for the higher-risk investor, for someone who needs $5,000/month immediately
7:27 Comparison of scenarios 1a and 1b
8:34 By taking on more risk (via higher yield), the investor can get to $5,000/month with 40% of the original capital required
9:17 SCENARIO 2: UTILIZING TRUE DIVIDEND YIELD ON COST
10:25 On average, SCHD increases the dividend by 12% per year.
10:42 BTI is growing the dividend by 2.64% per year on average.
10:57 See the pinned comment for my affiliate link to Blossom Social.
11:47 SCENARIO 2a: SCHD
13:00 $439,294.25 is required if the investor is willing to wait 10 years (and the dividend growth holds up)
13:15 KEY: The investor waited 10 years. The dividend reinvested, and the dividend kept growing!
14:19 Check out the pinned comment for a link to my Patreon.
15:00 If the investor can wait 15 years, only $189,239.93 may be required as a lump-sum investment in year 1.
15:12 Will 12% dividend growth keep up? Numbers must be looked at as directional.
16:20 In practice, most investors are not just lump sum investing. Many investors will keep adding more capital, over time.
17:15 KEY: Most times, spreadsheets can over-estimate dividend growth.
17:50 SCENARIO 2b: BTI
18:52 $296,050.56 lump sum required in year 1 to drive $5,000/month in year 10.
19:30 This model does not account for inflation. This model is direction. It’s meant to show how it all works. It’s impossible to tell the future.
19:54 I believe this model is ore realistic than the SCHD one. I’m not relying on dividend growth too much. I’m relying on the existing dividend.
20:37 TRUE DIVIDEND YIELD ON COST
21:30 In year 15, my model shows a possible 30% dividend yield-on-cost.
21:40 KEY: ALL models in my video today are just hypothetical. They are just directional. We cannot know what the future holds.
22:27 Yield-on-cost takes the requirement down to about $200,000-$400,000 for $5000/month.
23:12 Dividend investing is not easy.
23:19 SUMMARY
25:28 DISCLOSURE AND DISCLAIMER
DISCLOSURE: I am long British American (BTI) and SCHD. I own this stock and ETF in my personal dividend stock portfolio.
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