Get Dividends From Stocks Every Month
Today, our goal is to build a dividend income portfolio for $2,000 a month in dividends. Are you interested in making money from dividends? If yes, then read on.
First of all, I’m going to show you 5 steps to build a dividend portfolio for $2,000 in dividends every month.
Then, I’m going to share some great tips. On finding and selecting dividend stocks for a dividend portfolio.
Finally, we will pull it all together. With a model dividend income portfolio generating passive income from dividends.
For an overview, let’s first look at the 5 steps for building an income portfolio that generates $2,000 a month in dividends. And before you go, check out all of our articles for making money with dividends.
How To Make $2,000 A Month In Dividends: A 5 Step Plan
- Choose a desired dividend yield target
- Determine the amount of investment required
- Select dividend stocks to fill out your dividend income portfolio
- Invest in your dividend income portfolio regularly
- Reinvest all dividends received
These 5 steps remain the same no matter how much monthly dividend income you desire.
So, let’s dive into each of these steps. When we are done, you will know exactly how to make $2,000 a month in dividends.
And be able to get busy choosing the right dividend stocks. For your dividend income portfolio.
Disclosure: At no cost to you, I may get commissions for purchases made through links in this post.
1. For $2,000 A Month In Dividends: Choose A Desired Dividend Yield Target
Your first step to making $2,000 in monthly dividends is to choose a dividend yield target. And that means understanding dividend yield.
To Know How To Get Dividends – Understand 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 XYZ Company pays $3 per share in dividends during the year. And XYZ’s share price is $100. Then, the dividend yield is, $3 divided by $100, or 3%.
When I choose dividend stocks, I prefer dividend yields between 3% and 5%.
Because the dividend yield tells me some important information.
What Does Dividend Yield Tell Us When Seeking Monthly Dividends?
Here’s my theory on dividends and the resulting dividend yields they create…
Stocks with dividend yields of less than 3% simply do not pay enough, in my opinion. Especially, when the goal is to make a lot of money each month from dividends. And $2,000 a month in dividends is a lot of money to me.
On the other hand, stocks with dividend yields greater than 5% may indicate a higher degree of investment risk. What do I mean when I say investment risk? I mean the risk that the dividend may be suspended or reduced in the future.
Of course, I make exceptions to my 3-5% dividend yield rule of thumb.
Furthermore, after you purchase a dividend stock, it is not uncommon for the dividend yield to drift outside of that range. But, it’s a good starting point to consider. When choosing your dividend stocks.
Why is choosing a target dividend yield important? Let’s cover that next, in step 2.
2. Determine The Investment Required To Make $2,000 A Month In Dividends
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.
To calculate the investment necessary for $2,000 in monthly dividends…
First, Calculate Your Dividend Income Portfolio’s Yield
To calculate your dividend portfolio’s yield, take the annual amount of dividends paid from all your dividend stocks. And divide that by the total market value of all the dividend stocks you own.
So, let’s say your dividend portfolio yields 4% in total. That’s right in the middle of my 3-5% desired range.
Your portfolio yield may be different. Furthermore, dividend yields for individual stocks as well as an entire dividend portfolio can change daily.
This is because dividend yield has an inverse relationship with stock prices. And we all know how fast stock prices can change.
But let’s not get hung up in daily stock movements.
After all, we are long-term buy-and-hold dividend stock investors. And we are seeking to make $2,000 a month in dividends.
Knowing your dividend income portfolio’s yield will tell you how much you need to invest to make $2,000 in dividends every month. Let me show you.
Second, Calculate The Investment Required To Make $2,000 A Month In Dividends
To calculate the amount of investment required, first take $2,000 a month times 12 months. That gives us $24,000 in annual dividend income.
Then take that $24,000 and divide it by your target dividend yield. 4%, in this example. Thus, $24,000 divided 4% which is .04 gives us $600,000.
How Much Do You Need To Invest To Make $2,000 A Month In Dividends?
Therefore, $600,000 is how much you will need to invest to make $2,000 a month in dividends. Assuming your portfolio’s dividend yield is 4%.
Yes. This is a lot of money.
But remember. Dividend investing is a journey. Not a destination.
Just get started. And before you know it, you will be making $50 a month in dividends.
Then continue growing your dividend income from there.
Third, Revisit The Investment Required To Make $2,000 A Month In Dividends
Maybe saving and investing $600,000 seems out of reach? If so, you may revisit your target dividend yield and target a higher number.
Let’s say, you decide to move your target dividend yield up to 6%. Because you have decided to invest in stocks with higher dividend payouts.
How Much Do You Need To Invest To Make $2,000 A Month?
With a 6% dividend yield, you only need to invest $400,000 to make $2,000 a month in dividends.
That is calculated as $24,000 divided by 6%, or .06.
Finally, Important Words On Dividend Safety In Route To $2,000 In Dividends Monthly
In dividend income investing, higher dividend yields can signal higher investment risk. As I mentioned earlier, higher risk means a greater likelihood that a company may reduce or suspend its dividend in the future.
Dividend reductions are big bumps in the road to making $2,000 in monthly dividends. So, you should try to avoid risky dividends at all costs.
Make A Judgement About Dividend Safety
With that said, here are some good tips on what to look for. For making a judgment on a stock’s dividend safety:
- Dividend payout ratios: lower is safer
- A history of dividend payments: long and stable is safer
- Dividend yield: lower is safer
- Free cash flow generated by the business: More is safer
- Debt levels: Lower is safer
- Credit ratings: Higher is safer
If some of these terms and concepts are new to you, do not worry. You can learn all about them in this comprehensive beginner’s guide to how dividends and dividend stocks work.
Otherwise, read on…
Because it’s time for step 3 in our plan to make $2,000 in monthly dividends.
3. Select Dividend Stocks That Will Achieve $2,000 A Month In Dividends
Now it’s time to find and pick your dividend stocks. There are many considerations when selecting stocks for your dividend income portfolio.
But a few are more important than others.
When your goal is to make $2,000 in monthly dividend payments. Thus, here are several things you will want to pay close attention to.
Plus, you can read and learn more here: a comprehensive beginner’s guide to analyzing and selecting dividend stocks.
For Monthly Dividend Payments, Choose The Best Dividend-Paying Companies
The past is not always a great indication of the future. But in the case of dividend stocks, history can tell us a lot.
You should fill out your dividend income portfolio with consistent dividend-paying companies. Those companies with long-term track records of making recurring dividend payments to shareholders.
Here are places to look for these types of stocks…
How To Get Dividends From Stocks: Know The Dividend Kings & Aristocrats
There are 2 lists of dividend-paying companies that are quite helpful when looking for dividend stocks.
First, are the Dividends Kings.
On this list, each company has paid and increased its dividends for 50 years in a row or more.
Second, are the Dividend Aristocrats.
They represent companies trading in the S&P 500 stock index. Also, these stocks have paid and increased their dividends for at least 25 consecutive years.
As you look at stocks from these lists, you will see that many are clustered in specific stock market sectors.
Allow me to explain. I will do so by highlighting some typical sectors where you can find good dividend stocks.
You can find a comprehensive dividend stock review for each of these companies in my dividend investing resource center. See the menu at the top of this page.
Get Dividends From Utility Stocks
The global economy runs on electricity, oil, and natural gas. These products are about as essential as it gets.
Investing in electric utility companies can be a cornerstone of a blue-chip dividend stock portfolio. Here are some examples.
- American Electric Power (AEP)
- Duke Energy (DUK)
- Southern Company (SO)
Consumer Staples Stocks That Pay Dividends
Another sector that is essential to our lives is consumer staples. We all need companies that provide food & beverages, and household products.
Especially given recent events that have encouraged us to spend more time in our homes. When I think of companies in the consumer staples sector, I think of:
- Altria (MO)
- Clorox (CLX)
- PepsiCo (PEP)
Earn Dividends From Technology & Telecommunications Stocks
For our next sector of stocks appropriate for making $2,000 a month in dividends. Consider investing in technology and telecommunications companies.
If I was writing this article 15 years ago, this sector would hardly have deserved a mention. But now the tech sector has evolved and matured to be as essential as any other product or service in our daily lives.
Furthermore, investing in a large telecom company means the chance to participate in the roll-out of 5G networking. And the “internet of things”.
Examples include companies like:
- AT&T (T)
- Apple (AAPL)
- IBM (IBM)
- Cisco (CSCO)
Health Care & Pharmaceutical Stocks That Pay Dividends
First of all, as populations age in developed countries, health care spending keeps growing. Furthermore, health care products and services are just as essential to our lives as energy, food, and technology.
So, consider a dividend stock from the health care sector. Perhaps more than just 1. Some of my favorites include:
- AbbVie (ABBV)
- Johnson & Johnson (JNJ)
- Medtronic (MDT)
Get Dividends From Stocks That Provide Services
The services sector is very broad and contains a wide variety of dividend-paying stocks for monthly income.
They operate both business to business (B to B). In addition to business to consumer (B to C).
Some stocks that provide services include:
- Automatic Data Processing (ADP)
- McDonald’s (MCD)
- Paychex (PAYX)
- Sysco (SYY)
Earn Dividends From Industrial Stocks
The industrial sector also includes a good stock or 2. Consisting of companies that are the backbone of the global economy.
But this sector can be a little tougher to find good blue-chip stocks. With a long history of growing dividends.
Because these companies are more susceptible to the ups and downs of the business cycle. And can be negatively impacted during a recession.
But here are some names to consider. They have paid reliable dividends for a long time:
- United Parcel Service (UPS)
- Emerson (EMR)
- Cummins (CMI)
So, I have given you some examples of good dividends stocks. And where to find them.
But don’t forget this next point. When picking stocks to make $2,000 in monthly dividend payments…
Pick The Best Dividend Stocks That Also Meet Your Dividend Yield Profile
When you build a dividend portfolio for regular income, don’t forget step 1. That’s where you chose your dividend yield target.
The dividend yield helped us understand how much investment is required to make $2,000 a month in dividends. It also helps you choose your dividend stocks.
Using the 4% target dividend yield as an example, look for companies that fulfill that target. But, most companies will not have a dividend yield of exactly 4%.
So set a range to work with. Let’s say between 3.75% and 4.25%. And consider this next point too. When picking your dividend stocks…
For Monthly Dividend Payments, Know Your Stocks Payment Pattern
You want to make $2,000 a month in dividends. Right? That’s why you are here and reading this.
So, understanding when each company you choose for your dividend income portfolio pays its dividends is important.
First of all, most U.S. dividend stocks payout quarterly. In other words, 4 times per year.
Furthermore, there are three common quarterly payment patterns that a company will follow.
- Dividend payers during January, April, July, and October
- February, May, August, and November dividend-paying stocks
- Stocks paying dividends in March, June, September, and December
To build a dividend portfolio for $2,000 a month in dividends, you need at least 3 different stocks. One in each of the quarterly payment patterns.
If you have 6 stocks, select 2 for each payment pattern. 9 dividend stocks, then 3 for each payment pattern. I’m sure you get the idea.
Why is this important?
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 dividend payments will be roughly equal each month. Recall, that $2,000 in monthly dividends is the goal.
Thus, by considering your chosen stock’s dividend payment pattern. You are on your way to getting dividends every month.
How Many Dividend Stocks Must You Pick To Make $2,000 In Monthly Dividends?
There is no 1 right answer to this question when building a dividend portfolio for monthly income.
Monthly Dividend Payments With 1 Stock
This is not recommended, but you can have 1 stock portfolio. Because some companies choose to make monthly dividend payments.
My favorite company that pays dividends monthly is Realty Income (NYSE: O). Realty Income is a REIT. REIT stands for a real estate investment trust.
Realty Income is appropriately known as the monthly dividend company. Furthermore, there are dozens of other companies that pay monthly dividends.
But, be careful. 1 stock does not provide enough diversification. No way.
Not when we are shooting for $2,000 a month in dividends. Also, stocks that pay monthly dividends tend to be riskier than others.
Remember, we need approximately $600,000 to build this investment portfolio. And unless you are a multi-millionaire, that’s way too much to put in 1 stock. Or trust in stocks that have a higher risk.
Dividends Every Month From 3 Dividend Stocks
As we just discussed, pick 1 from each of the quarterly payment patterns.
Once again, this is not enough diversification for me. That is a $200,000 investment in 3 dividend stocks to achieve the goal of $2,000 in monthly dividends.
Academics Suggest 20-25 Stocks For Diversification
Research shows that less than 20 dividend stocks may not provide enough diversification. More than 25, and the incremental diversification benefits from each additional dividend stock are minimal.
Your best number of dividend-paying stocks may fall somewhere in the middle of this range from 1 to 25. As I said, there is no 1 exact answer to this question.
Get started with at least 3 dividend stocks. But realize, there is little need for more than 20.
Just be sure that each stock you buy is from a different industry. For example, don’t invest solely in utility stocks just because they yield 4%. Or, pay dividends in certain months.
20 stocks would allow you to target a $30,000 investment in each one. For a total investment of $600,000.
Assuming your dividend portfolio yields 4%. Then you would produce on average $2,000 a month in dividends.
I’ve given you some stock suggestions already. Let’s pull them all together into a model portfolio for dividend income.
Table 1: Model Dividend Income Portfolio For $2,000 A Month In Dividends
|Stock #||Stock Symbol||Dividend Yield|
Table 1 Notes: $2,000 A Month Dividend Portfolio
- I have noted the dividend yield for each stock at the time of this writing. They will change daily, so the dividend yields are for example purposes only.
- Assuming an equal amount invested in each stock (5% of portfolio market value), at the bottom of the table I have calculated the dividend portfolio’s yield…
- Investment required for $2,000 a month in dividends = (2,000 x 12) divided by 3.4% equals $706,000
- By targeting higher dividend yield stocks, the investment required can be reduced
Next, I would like to share some of the other resources I use for generating monthly dividend payments.
They represent different tools. Just like a mechanic has a toolbox. So does a dividend investor.
But, what is the great thing about these tools? The answer is, that many of them are free!
So, let’s cover those now. Each is linked to its information and sign-up page.
Additional Resources For Maintaining A Dividend Investing Portfolio For Monthly Income
First, you need a brokerage account to buy stocks. Most noteworthy, be sure to trade stocks for free. I use the Webull app.
Webull’s app is fast, powerful, and easy to use. And, for a limited time Webull, is offering free stock to anyone who signs up and funds their account.
Also, we can all get better at dividend stock selection. It is a process of continuous learning and monitoring. Here are some resources I recommend.
First of all, the Simply Investing Report provides analysis and dividend stock recommendations. Its focus is on quality dividend-paying stocks from the U.S. and Canada.
Furthermore, Morningstar provides expert investment research. I’ve been using Morningstar investment analysis for more than 15 years.
Next is M1 Finance. This company has great tools for building a diversified investment portfolio.
Also, you might want to consider opening an IRA with M1 Finance. An IRA is a good place to build your portfolio of stocks paying $2,000 a month in dividends.
Because depending on the type of IRA, your dividends will be tax-deferred. Or better yet, tax-free.
And finally, I pull all of my finances together using Personal Capital.
It allows me to see all my spending and investments in 1 place. Best of all, Personal Capital is free to sign up and use.
Seeing your financial picture in one place is extremely important. Especially when it comes to our fourth step in your quest to make $2,000 in dividend payments monthly.
4. Invest Regularly And Build Up To $2,000 A Month In Dividends
Step 4 in our plan for $2,000 in monthly dividends may be the toughest of all.
Why is that? You might be asking.
Because choosing dividend stocks and investing in them is fairly easy. With a little knowledge, research, and the tools I suggest, anyone can do it.
Your biggest personal finance challenge may be making more money. Also, spending less than you make.
That simple equation creates excess cash for your monthly dividend payments plan. In other words, you have to create excess cash to invest in the dividend stocks of your choosing.
Because we are talking about some big money here. A $600,000 investment portfolio that will allow you to make $2,000 a month in dividends.
So, look for ways to make more money. And focus on living below your means. To fund your dividend portfolio.
Okay. We are now ready for the last step in our journey to learn how to make $2,000 a month investing.
And this last topic is about dividend reinvestment.
5. Reinvest All Dividends To Accelerate Your $2,000 A Month In Dividends Plan
This is where you want to put the power of dividend compounding to work. You have a couple of options for reinvesting your dividends.
Automatic Dividend Reinvestment
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. Right back into that company’s shares.
The advantage of automated dividend reinvesting is that once you set it up, you can forget it. And your cash from dividends is put back to work in your dividend stocks right away.
On the other hand, investment decisions are taken out of your control. You may automatically reinvest in shares of an overvalued stock. Or, a stock you own too much of already.
Lump-Sum Manual Dividend Reinvestment
The second option is to let your dividends accumulate in cash.
Then when you are making your monthly dividend stock purchases. Add your dividends received to the amount you are saving each month.
Just don’t forget to periodically put cash from savings and dividends into the dividend stocks of your choice. Lump-sum.
Either of these dividend reinvestment methods is fine. It’s a matter of personal preference.
And by all means. If you will be tempted to spend your dividends, reinvest them automatically.
When To Stop Dividend Reinvesting
Finally, when you achieve your goal of $2,000 in monthly dividend payments you have the option to stop reinvesting.
That choice is yours. Once you have achieved your goal!
Because the type of dividend you are receiving is cash. And cash has many uses.
You can save it, spend it, lend it, invest it, or donate it. Whatever you like.
Because once you receive a dividend it can never be taken away.
So, there are 5 steps to making $2,000 a month in dividends. And some bonus information on where to find dividend stocks. Also, some tips for organizing those stocks into a monthly dividend portfolio.
Before I wrap up…
More Frequently Asked Question About Making $2,000 A Month Off Dividends
Let’s cover several more questions.
Are Dividends Better Than Capital Gains?
Dividends are not better than capital gains necessarily. Because both represent a return on your investment.
However, dividends have some advantages.
First, unlike unrealized capital gains, dividends received can never be taken away. Second, dividends are immediately available for your use.
Since there is no need to sell shares to generate cash.
Are High Dividend Yield Stocks Good?
High dividend yield stocks are only good when the dividend is safe from being reduced.
Typically higher yields indicate greater investment risk. So, it is important to do your research before investing.
Can You Lose Money On Dividend Stocks?
Yes. You can lose money on dividend stocks.
Losses on dividend stocks typically occur when the overall stock market goes down. Pulling all stock prices down with it. Or, when a dividend-paying company runs into financial difficulty.
On the other hand, by selecting companies with a long history of paying recurring dividends. And by investing for the long-term.
Your risk of loss can be minimized. But never can it be eliminated.
Okay. That’s all I have for today.
Let’s summarize the 5 steps we covered. And wrap this up.
How To Make $2,000 A Month In Dividends – A 5 Step Plan
- Choose a desired dividend yield target
- Determine the amount of investment required
- Select dividend stocks to fill out your dividend income portfolio
- Invest in your dividend income portfolio regularly
- Reinvest all dividends received
More Reading About How To Earn Dividends Through Dividend Investing
- How to determine what to pay for a dividend stock
- Best stocks increasing dividends every year
- Dividend portfolio tips with stocks that pay dividends monthly
Resources For Getting Dividends From Stocks
I referenced several tools and resources throughout the article. Many of which I have used for creating an income portfolio for monthly dividend payments.
Here they are summarized for your convenience.
|The Webull app for free stock trading|
|Dividend stock research & recommendations from Simply Investing|
|Stock analysis from Morningstar|
|Financial services & IRA accounts from M1 Finance|
|Manage your spending, savings & investments with Personal Capital|
Author Bio, Disclosure, & Disclaimer: Please join me (Tom) as I try to achieve my goals, find my next place to live, and make the most of my money. But understand, I am not a licensed investment adviser, financial adviser, real estate agent, or tax professional. I’m a 50-something-year-old guy, CPA, retired finance professional, and part-time business school teacher with 40+ years of DIY investing experience. I’m just here because I enjoy sharing my findings and research on important topics. However, nothing published on this site should be considered individual investment advice, financial guidance, or tax counsel. Because this website’s only purpose is general information & entertainment. As a result, neither I nor Dividends Diversify can be held liable for any losses suffered by any party because of the information published on this blog. Finally, all written content is the property of Dividends Diversify LLC. Unauthorized publication elsewhere is strictly prohibited.