How To Make $1,000 A Month In Dividends

5 Step Plan For $1,000 In Dividends Every Month

Let’s talk about how to make $1,000 a month in dividends.

Because who wouldn’t want to have a nice stream of monthly dividends of that size?

So, I’m going to explain a 5 step plan to build a dividend portfolio, That generates regular monthly income from dividends.

For an overview, let’s review the 5 steps to get dividends every month.

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Disclosure: At no cost to you, I may get commissions for purchases made through links in this post.

How To Make $1,000 A Month In Dividends: 5 Step Plan

1. Choose a desired dividend yield target
2. Determine the amount of investment required
3. Select dividend stocks to fill out your dividend portfolio
4. Invest in your dividend income portfolio regularly
5. Reinvest all dividends received

Here’s the good news. These steps rarely change when your goal is monthly dividends.

They are the same whether you want $100 a month in dividends, $500 a month in dividends, $1,000 a month in dividends, or more.

Okay, now you know the steps in the plan.  So, let’s dive into each of these areas in greater detail.

Before we wrap up, I will also address several frequently asked questions about earning dividend income. Also, how dividends compare to other investments for making money every month.

Then, you will know the importance of dividends as a good option for monthly income. And, exactly how to make $1,000 a month in dividends.

Let’s dive in right now.  So you can get started building your dividend portfolio for monthly income right away.

1. For $1,000 A Month In Dividends First Choose A Desired Dividend Yield Target

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Your first step to making $1,000 in monthly dividends is to choose a dividend yield target. Furthermore, the understanding of dividend yield is important knowledge for earning dividends.

What Is Dividend Yield?

The dividend yield is the annual amount of dividends paid by a company divided by the company’s stock price.

For example, let’s assume ABC Company pays a $4 per share annual dividend. And ABC’s share price is $100.  Then, the dividend yield is, $4 divided by $100, or 4%.

When I choose dividend stocks, I prefer dividend yields between 3% and 5%. 

Why is that?

Because higher dividend yields usually mean less dividend safety and greater investment risk.

Dividend safety and investment risk are important points.  Let’s discuss them more before moving on to step 2 in this plan for increasing monthly dividends.

Dividend Yield, Dividend Safety, and Investment Risk

When I speak of high dividend yield, I mean 6%, 7%, or more. Typically, a high dividend yield indicates one or two different situations.

In the first situation, a high yield may indicate a company with slow growth prospects.  But, an otherwise safe dividend.

So, stock market investors demand a high dividend yield.

How come?

Because they expect little in the way of future share price appreciation.  From a slow-growth company.

Thus, investors want their return on investment in the form of a high dividend.  U.S.-based tobacco company Altria comes to mind when I think of a high dividend stock in this situation.

The second high dividend yield scenario is more concerning.  This is the case where the dividend is not safe.

An unsafe dividend means the company may reduce or suspend its dividend in the future.  These are the types of dividend stocks we want to avoid. So, it’s important to do your stock research.

A reduced or suspended dividend will almost always be accompanied by a steep drop in the share price.  So, it is a double loss!

First of all your monthly dividend income is reduced.  Second, the stock’s value almost always decreases by a large amount.

Don’t think I know how it feels?

Well, I do. One of my long-time dividend stock holdings, Dominion Energy reduced its dividend in recent years.  So did Royal Dutch Shell.

Recessions and economic challenges make it tough for some companies.  But don’t be discouraged, many other companies and their stocks thrive during difficult times.

Companies like Clorox, UPS, and Walmart come to mind immediately.

We are ready to move on.  But, let’s recap step 1 before we do so.

Step 1 Recap: Choose Your Dividend Yield Target

Step 1 in your mission for $1,000 in monthly dividend payments gets us started.

So, choose your desired dividend yield target.  3-5% is a good range to consider.

You can go with a higher dividend yield target.  Just realize it likely comes with less dividend safety and higher overall investment risk.

I don’t know about you. But, a safe dividend is very important to me as an investor.

Why is choosing a target dividend yield important?  Let’s cover that next, in step 2.

2. Determine The Investment Required To Make $1,000 A Month In Dividends

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Each stock in your dividend income portfolio will have a dividend yield.  Each dividend stock will then combine to generate a dividend yield for your entire dividend income portfolio.

Calculating A Dividend Income Portfolio’s Yield

For example, let’s say a dividend portfolio yields 5% overall.  That’s right at the top of my preferred 3-5% range.

Yes. I’m stretching for a little extra dividend yield with this example.

Why?

Because $1,000 a month in dividends is a big number.

But, I don’t want to take on too much investment risk. Not by going with a higher dividend yield larger than 5%.

To calculate your portfolio’s yield:

Add up the annual amount of dividends paid from all your dividend stocks.  Then, divide that number by the total market value of your dividend income portfolio.

Knowing your dividend income portfolio’s yield will tell you how much you need to invest to make $1,000 in dividends every month.

Allow me to show you…

Calculating The Investment Required To Make $1,000 A Month In Dividends

To calculate the investment required, first, take $1,000 a month times 12 months.  That gives us $12,000 in annual dividend income.

Then take that $12,000 and divide it by your target dividend yield.  5%, in this example.

Thus, $12,000 in dividends divided 5% which is .05 gives us $240,000.

So, according to this example, $240,000 is much money you need to make $1,000 a month in dividends.  This assumes your portfolio has a dividend yield of 5%.

Revisiting The Investment Required To Make $1,000 A Month In Dividends

Does saving more money and investing $240,000 seem out of reach?  If so, you may revisit your target dividend yield.

Increase it to reduce the amount necessary to invest.  Just remember that decision comes with increased investment risk and potentially less secure dividends.

Let’s recap step 2.  Then, we will be ready to move on.

Step 2 Recap: How Much To Invest To Make $1,000 In Dividends Each Month

In step 2, use the target dividend yield from step 1. To calculate how much investment is needed to make $1,000 a month in regular dividend income.

In our example, $1,000 per month in dividends times 12 equals $12,000 of income per year.  $12,000 divided by 5% gives us a $240,000 required investment.

Your target dividend yield may be different. And as you build out your dividend portfolio for monthly income, your actual portfolio yield will fluctuate.

So, I want to repeat the method for calculating your portfolio’s dividend yield. As you move through your dividend investing journey.

Here it is…

Add up the annual amount of dividends paid from all your dividend stocks.  Then, divide that number by the total market value of your dividend income portfolio.

Portfolio dividend yield plays a huge part in determining your actual investment required. To make $1,000 a month in dividends.

Okay. We are just getting rolling here. In our quest for monthly dividends.

So, it’s now time for step 3 in our plan to make $1,000 every month.

3. Select Dividend Stocks That Will Achieve Your $1,000 A Month In Dividends Goal

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Now it’s time to pick your dividend stocks.  There are many considerations when selecting dividend stocks for a dividend income portfolio.

But a few are more important than others. When your goal is to make $1,000 in monthly dividend payments.

Thus, here are several things you will want to pay close attention to…

For Monthly Dividend Payments, Choose The Right Dividend-Paying Companies

The past is not always a great indication of the future.  But in the case of dividend-paying companies, history can tell us a lot.

You should fill out your dividend income portfolio with solid dividend-paying companies.  Those companies with long-term track records making consistent dividend payments to shareholders.

There are 3 lists of dividend-paying companies that are quite helpful when sourcing dividend stocks. In my opinion, it’s tough to go wrong selecting stocks from these lists.

I have listed them starting with the most prestigious.

First of all, we have the Dividends Kings.  They are companies that have paid and increased dividends for at least 50 years in a row.

Furthermore, look at the Dividend Aristocrats.  They represent companies trading in the S&P 500 stock index that have paid and increased their dividends for at least 25 consecutive years.

Finally, seek out some up and comers, the Dividend Achievers. Dividend Achievers are stocks of companies that have increased dividends per share for at least 10 years. Plus, they must meet minimum stock market liquidity requirements.

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By using dividend stock lists like the Kings, Aristocrats, and Achievers you can increase your odds of picking quality dividend stocks. But do your research.

On the other hand, you could do a lot worse than picking 15-20 Dividend Kings. And filling out your monthly dividend income portfolio with them

But remember, investing has a risk of loss. It’s your money, so invest it and manage it wisely.

Furthermore, don’t forget this point about your dividend stock picks.  Each stock should have a dividend yield at or near your target dividend yield from step 1.

Let’s say in the range of 4.75% to 5.25%.   Using the example I’ve been building throughout this article.

How Many Dividend Stocks Are Required For $1,000 In Monthly Dividends?

There is no 1 right answer to this question when building a dividend stock portfolio for monthly income.  But, with nearly a quarter-million dollars invested in dividend stocks, we want to get this right.

So, I suggest going with the academic research in this area.  Research shows that between 20 and 30 dividend stocks provide enough diversification.

More than 30, and the incremental diversification benefits from each additional dividend stock are minimal.  Less than 20, and individual security risk increases rapidly.

However, this assumes that the stocks selected are diverse.  When I say diverse, I mean that the stocks represent:

1. Different size companies
2. Operating in different industries
3. From different sectors of the stock market

Consider this example.

What would happen if you formed a portfolio of stocks from 30 technology companies?

In this case, you might believe your portfolio is diversified.  Since you have invested in 30 different stocks.

But because these stocks have similar traits. Specifically, all from the tech sector.

You are dangerously close to “having all of your eggs in 1 basket”.

So, shoot for at least 5-10 stocks in your portfolio to get started. Then build up to 20 or so as time passes.

This doesn’t take as much money as you might think.  With zero-commission stock trading, it’s okay to buy 1 share of a company’s stock to get started.

One last point about picking dividend stocks for earning a regular income.

For Monthly Dividend Payments, Know Your Stocks Payment Pattern

To get dividends every month, understand and learn about dividend stock payment patterns.

You came here because you want to make $1,000 a month in dividends.

Right?

That’s why you are reading this.

So, understanding when each company pays its dividends is important.

Here’s a quick lesson…

Most U.S. dividend stocks pay out quarterly, or 4 times per year.  Furthermore, there are three common quarterly payment patterns that a company will likely follow.

They are:

1. January, April, July, October
2. February, May, August, November
3. March, June, September, December 

To build a dividend portfolio that pays you $1,000 in monthly dividends, you will want to select a roughly equal number of stocks from each payment pattern.

For example, if you have 12 dividend stocks, then shoot for 4 in each of the 3 payment patterns.

Why is this important? You may be asking.

Because by equally balancing the number of stocks in each payment pattern category, your dividend income portfolio will allow you to get dividends every month.  And those monthly dividend payments will be roughly equal.

Recall, $1,000 in monthly dividends is the goal.  Doing it this way, earn consistent dividend income.

Just be careful here. Don’t buy a stock only because it pays its dividend at a certain time.

Also, make sure you are buying a high-quality dividend-paying company. Remember that Dividend Kings and Dividend Aristocrats usually “fit the bill”.

Okay. Let’s recap. Then move forward.

Step 3 Recap: Pick The Dividend Stocks For Your Monthly Dividend Portfolio

Find great dividend stocks from the list of Dividend Kings, Aristocrats, and Achievers.

They aren’t the only place to source your dividend stocks.  But, they are a great place to get started.

Do your investment research.

By selecting those companies and their stocks that you believe have a solid business. Also good investment, and dividend prospects.  And be sure they meet your target dividend yield profile.

Look for diversification across stock market sectors and industries from your stock picks.  Aim for between 20 and 30 dividend stocks.

Finally, fill out your monthly income portfolio from each of the 3 quarterly dividend payment patterns.

Okay. Are you ready for step 4 in the plan for $1,000 in dividend income each month?

Ready or not, let’s do it.

4. Save And Invest Regularly To Build Up To $1,000 A Month In Dividends

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Step 4 in the plan for $1,000 in monthly dividends may be the toughest of all. 

Why is that?

Because becoming a dividend investor is fairly easy.  With a little knowledge, research, and effort most anyone can do it.

Your biggest personal finance challenge may be making more money.  Also, spending less than you make to save money.

Making more money and spending less creates excess cash. The money to feed your monthly dividend payments plan.

In other words, you have to create excess cash to invest in the dividend stocks of your choosing.

So, screw your head on straight and buckle in for the ride. Because saving money and dividend investing are long-term journeys.

First of all, focus on your main income source, being your job, profession, or career.  And keep that money rolling in.

Furthermore, live below your means.  Track your spending. And look for ways to save money.

Spend money intentionally on only what you need and value.  Forget about spending on the rest of it.

It may seem like a sacrifice.  But, you will be glad you did when you are living off dividends in the future.

Step 4 Recap:  Consistently Invest In Your Monthly Dividend Portfolio

Make more, spend less to create excess cash flow.  Then invest the excess cash flow in the dividend stocks of your choosing.

Buy a consistent amount each month of the best dividend-paying investments.  No matter the ups and downs in the stock market.

Always keep in mind that dividend investing is a long-term investment strategy.

It’s not a race. It is a journey.

Okay.  We are now ready for the last step in your plan to make $1,000 a month in dividends.

This step is about dividend reinvestment…

5. Reinvest All Dividends To Accelerate Your $1,000 A Month In Dividends Plan

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You have a couple of options for reinvesting your dividends. And doing so is key for growing an income snowball.

Automatically Reinvest All Dividends

First of all, you can automate dividend reinvesting.

What this means is that you tell your brokerage firm to automatically reinvest the dividends paid by a company back into that company’s shares.

Set it up and forget it.

Your cash from dividends is put back to work in your dividend stocks right away.

But, think about this. The investment options are taken out of your control with this method.

There could be better investment options.

You may automatically reinvest in shares of a stock you own too much of already. Or, an overvalued stock. Stock valuation is an important consideration.

But don’t take me the wrong way here. I’m a fan of automatic dividend reinvestment. And did so for many years as I built out my dividend portfolio.

However, let’s talk about the 2nd option for dividend reinvestment.

Manually Reinvest Dividends That Accumulate In Cash

Each month when making your monthly dividend stock purchases. Add your dividends collected in cash to the amount you are saving each month.

Then, put that money into the dividend stocks of your choice. Sometimes this is referred to as lump-sum dividend reinvesting.

Either of these 2 dividend reinvestment methods is fine.

It’s a matter of personal preference. Each is a solid but simple investing technique.

Finally, when you achieve your goal of $1,000 in monthly dividend payments you have the option to stop reinvesting dividends.

That choice is yours.  Once you have achieved your goal!

Okay now. We are hitting the home stretch.  So hang with me.

Let’s recap step 5.  Handle a few frequently asked questions.  Then, conclude.

Step 5 Recap:  Reinvest All Dividends Received

Choose to reinvest all of the dividends you receive.  From each dividend stock.

Either automated dividend reinvesting or lump sum manual reinvesting are both fine options.  You can even choose to do a combination of these 2 methods.

Just don’t spend 1 penny of the dividends you receive.  At least not until you reach your goal of earning $1,000 per month in dividends.

Okay. That concludes the details on each of the 5 steps to make $1,000 a month in dividends.

I will summarize the 5 steps. And, wrap this up in just a moment.

But first, allow me to answer a few frequently asked questions…

Frequently Asked Questions For Making $1,000 In Dividends A Month

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Are Dividends A Good Source Of Income?

Yes.  Dividends from blue-chip dividend-paying companies are a good source of income.

For many years, interest rates have been very low.  This has reduced the opportunity to earn investment income from other sources.

Savings accounts, certificates of deposit, and bonds have historically paid very little in form of monthly income.  So, many investors turned to dividends from dividend stocks as a good source of income.

Yes, when interest rates fall. Bonds and savings products pay very little.

However, many solid dividend-paying companies still continue to pay and increase their dividends every year.

On the other hand, when interest rates rise. They are often accompanied by inflation.

Fortunately, dividend growth stocks. From those companies that increase their dividends each year.

Have also proven to be an excellent hedge against inflation.

How Much Should I Invest For $1,000 A Month In Dividends?

The investment required to make $1,000 in dividends each month depends.  Since you have made it this far, you know it depends on the dividend yield of your dividend stock portfolio.

Here is a convenient table that shows the amount of investment required at different dividend portfolio yields.

What Is A Good Portfolio Dividend Yield?

I suggest dividend stocks that yield between 3% and 5% are optimal.  A stock with a dividend yield of less than 3% may not produce enough income.

On the other hand, higher dividend yields may seem better.  For the additional income provided.

But that is not always the case.  Often time’s higher dividend yields mean greater investment risk.  Also, they may indicate a dividend reduction is on the horizon.

Can You Lose Money Investing For Dividends?

Typically you can lose money by dividend investing in 2 situations. First, when the overall stock market declines. Second, if you invest in poor-performing dividend stocks.

On the other hand, by taking a long-term approach. And by choosing only the best dividend-paying stocks. The chances of losing money are reduced significantly.

Do I Have To Pay Taxes On My Dividend Income?

If you hold your dividend stocks in a taxable brokerage account, dividend income is considered taxable income.

The good news is that dividends are taxed at lower tax rates. Versus ordinary income.

Also, by holding your dividend stocks in an Individual Retirement Account (IRA). Taxes on dividend income may be deferred. Or, entirely eliminated.

It depends on the specific type of IRA that you own.

These are just some general guidelines.

Since everyone’s tax situation is different. It is best to consult with a tax expert familiar with your specific situation.

Okay. As promised, it’s time to wrap up.

So, allow me a few parting comments…

Wrap Up: $1,000 In Dividends Every Month

I hope you learned a lot from this discussion. Specifically, about how to make $1,000 a month in dividends. 

To recap, summarized below are the 5 steps. For receiving regular and routine dividend payments from companies.

As I said at the beginning, these steps stand true. No matter your monthly dividend income goal.

That is, whether your objective is $100 a month in dividends, $500 a month in dividends, or even $2,000 a month in dividends.

5 Steps For Making $1,000 A Month In Dividends

1. Choose a desired dividend yield target
2. Determine the amount of investment required
3. Select dividend stocks to fill out your dividend portfolio
4. Invest in your dividend income portfolio regularly
5. Reinvest all dividends received

My Favorite Dividend Investing And Personal Finance Resources

• Trade stocks for free with the Webull app
• Get stock research from Morningstar
• And stock analysis from Motley Fool
• Or dividend stock recommendations from Simply Investing
• Manage your finances for free with Personal Capital

Author Bio: Tom Scott founded the consulting and coaching firm Dividends Diversify, LLC. He leverages his expertise and decades of experience in goal setting, relocation assistance, and investing for long-term wealth to help clients reach their full potential.

I own all of the dividend stocks mentioned in this article with the exception of Royal Dutch Shell. I sold RDS.B after they reduced their dividend.

Make $1,000 A Month In Dividends: Now, Go Do It, My Friends!