How To Make $500 A Month In Dividends

Build A Dividend Portfolio For $500 In Monthly Dividend Payments

how to make $500 a month in dividends

Would you like to know how to make $500 a month in dividends?

I hope you answered yes.  Because I’m going to show you 5 steps to build a dividend portfolio for $500 in dividends every month.

For an overview, let’s first look at the 5 steps.

How To Make $500 A Month In Dividends:  Your 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 income portfolio
  4. Invest in your dividend income portfolio regularly
  5. Reinvest all dividends received

So when we are done, you will know exactly how to make $500 a month in dividends.  And be able to get busy building your dividend income portfolio 1 stock at a time.

Dividends from dividend stocks are the best form of PASSIVE INCOME! After all, who couldn’t use some extra money to make life a little better?

There is no reason to delay. Let’s dive into each of these 5 steps to create monthly dividend payments.

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

1.  For $500 A Month In Dividends Choose A Desired Dividend Yield Target

journey to $500 a month in dividends

All dividend journeys start with a first step.  Your first step to making $500 in monthly dividends is to choose a dividend yield target.

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 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 stocks with yields between 3% and 5%.  Why?  Because the dividend yield tells me some important information.

What Can A Stock’s Dividend Yield Tell Us When Seeking Monthly Dividends?

Stocks with dividend yields less than 3% simply do not pay enough, in my opinion.  On the other hand, stocks with dividend yields greater than 5% may indicate a higher degree of investment risk.

Of course, I make exceptions to my 3-5% dividend yield rule of thumb.  But, it’s a good starting point for choosing 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 $500 A Month In Dividends

$500 in monthly dividend payments

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

Calculating A Dividend Income Portfolio’s Yield

So, let’s say your dividend portfolio yields 4% in total.  That’s right in the middle of my 3-5% range.  Your portfolio yield may be different.

Calculate yours by taking the annual amount of dividends paid from all your dividend stocks.  And divide that by the 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 $500 in dividends every month.  Let me show you.

Calculating The Investment Required To Make $500 A Month In Dividends

To calculate the amount of investment required, first take $500 a month times 12 months.  That gives us $6,000 in annual dividend income.

Then take that $6,000 and divide it by your target dividend yield.  4%, in this example.  Thus, $6,000 divided 4% which is .04 gives you $150,000.

As a result, $150,000 is how much you will need to invest to make $500 a month in dividends assuming your portfolio yields 4%.

Revisiting The Investment Required To Make $500 In Monthly Dividend Payments

Maybe saving and investing $150,000 seems out of reach?  If so, you may revisit your target dividend yield.

To adjust the investment required, change your target dividend yield.

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 yields.

With a 6% dividend yield, you only need to save and invest $100,000.   That is $6,000 divided by 6%.

Just remember, higher dividend yields can signal higher investment risk.  From a dividend income investor’s perspective, higher risk means a greater likelihood that a company may reduce or suspend its dividend in the future.

Dividend reductions are a big bump in the road to making $500 in monthly dividends.  You should try to avoid a higher risk dividend at all costs.

It’s now time for step 3 in our plan to make $500 in monthly dividends.

3. Select Dividend Stocks That Will Achieve Your $500 A Month In Dividends Goal

monthly dividends

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

But a few are more important when your goal is to make $500 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 consistent dividend-paying companies.

Those companies with long-term track records making regular dividend payments to shareholders. A solid history of dividend appreciation is also an important consideration.

There are 2 lists of dividend-paying companies that are quite helpful in this regard.

First, are the companies known as Dividends Kings.  They are companies that have paid and increased their dividends for at least 50 years in a row.

Second, are 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.

Pick Dividend Stocks That 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 desired dividend yield target.

The dividend yield helped us understand how much investment is required to make $500 a month in dividends.  Also, use your target dividend yield to choose the right dividend stocks.

Using the 4% target dividend yield as an example, look for companies that fulfill that target.  Most companies will not have a dividend yield of exactly 4%.

So set a range.  Let’s say between 3.75% and 4.25%.

For Monthly Dividends, Know Your Stocks Payment Pattern

You want to make $500 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 dividends is important.

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 

When and how often a company pays dividends is part of its dividend policy. A dividend policy is important. And every company has one. Even if they choose not to communicate it to the public.

To build a dividend portfolio that pays you $500 in monthly dividends, you need at least 3 different stocks.  One in each of the quarterly payment patterns.

If you have 6 stocks, select 2 from each payment pattern.  9 dividend stocks, then choose 3 from each payment pattern.  I’m sure you get the idea by now.

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 stable dividends from dividend stocks every month.

And those dividend payments will be roughly equal each month.  Recall, $500 in monthly dividends is the goal.  This way, you get at least 1 dividend every month.

How Many Dividend Stocks Are Required To Make $500 In Monthly Dividends?

So, how many stocks for your dividend income portfolio? Unfortunately, there is no 1 right answer to this question when building a dividend portfolio for monthly income.

Consider these 3 options when determining the number of stocks to achieve $500 in monthly dividend payments.

1 Stock For Monthly Dividends

First of all, you can get monthly dividend payments with just 1 dividend stock.

How is that?  Because some companies choose to make monthly dividend payments.

My favorite company that pays monthly dividends is Realty Income.  Realty Income is a real estate investment trust (REIT).

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 that pays monthly dividends does not provide enough diversification, in my opinion.

3 Stocks For Dividends Every Month

A second option would be 3 dividend stocks.  As we just discussed, pick 1 from each of the quarterly payment patterns.

Academics Say 20-25 Stocks For Monthly Dividend Payments

Finally, a third option based on academic research, suggests 20-25 stocks is optimal 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.

And, as your holdings grow, you may want to consider non-U.S. based dividend-paying companies. They can provide additional diversification benefits for a smaller dividend stock portfolio.

Your Number Of Stocks To Get $500 A Month In Dividends

For building a passive dividend income stream, you may fall somewhere in the middle of this range from 1 to 25.  As I said first, there is no 1 right 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 not to invest in every company from the same stock sector. Depending on the size of your dividend income portfolio, each stock you buy should be from a different industry.

For example, don’t buy 10 utility stocks just because they yield 4%.  Or, pay dividends in certain months.

Possible Stocks For A Dividend Income Portfolio

You can find some great dividend investment ideas in the model dividend stock portfolio I maintain on this site.  Here are just a few of the stocks featured in it:

Company – BusinessStock Symbol
AT&T – TelecommunicationsT
Apple – Tech devices & softwareAAPL
Coca-Cola – BeveragesKO
Southern Company – Electric UtilitySO
United Parcel Service – LogisticsUPS

And, I would like to share some of the other resources I use for generating monthly dividend payments.  Let’s cover those now.

Additional Resources For Selecting And Buying Your Dividend Stocks

For your journey to $500 in monthly dividend payments, allow me to mention some tools I use to build, manage, and analyze my dividend stock portfolio.

First, you need a brokerage account to buy stocks.  Most noteworthy, be sure to trade stocks for free.

I use the Webull app.  It’s fast, powerful, free, 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 analyzing and selecting dividend stocks.  It is a process of continuous learning.

Here are 3 resources I use and recommend for choosing your dividend stocks.

First of all, the Simply Investing Report provides analysis and dividend stock recommendations.  It focuses on quality dividend-paying stocks from the U.S. and Canada.

Furthermore, Morningstar provides expert investment research.  I’ve been using Morningstar’s investment analysis for more than 15 years.

And finally, the Stock Advisor from Motley Fool is an excellent resource.  They have a solid long-term track record dating back to 2002.

4. Invest Regularly And Build Up To $500 A Month In Dividends

Step 4 in our plan for $500 in monthly dividends may be the toughest of all.  Why is that?

Because choosing dividend stocks and investing in them is fairly easy.  With a little knowledge, investment analysis, and effort most 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.

Make More Money For Your Monthly Dividend Payments Program

get dividends every month

How do you earn more money?  You do so by:

  • Investing in yourself
  • Improving your skills
  • Creating more value in your business, or for potential employers

Here’s a resource to improve your resume and find a better paying job.

Also, spend some time working a side hustle.  That can bring in some extra cash too.

This little side hustle won’t change your money world overnight.  But, every little bit of extra money counts.

Save More Money For Your Dividend Income Portfolio

I know.  It’s no fun to scrimp and save money.   But, spending less than you make is the second part of the earn more than you spend challenge.

Here are a few tips on saving money to feed your $500 monthly dividend payments program.

Consider how you can reduce your costs and save money. Think about your spending on these 4 big-ticket items and look to cut your costs in these areas wherever it makes sense.

  1. Housing
  2. Transportation
  3. Food and Beverage
  4. Leisure activities
monthly dividend payments

Sharpen your pencil and go through your budget with a fine-tooth comb.  When you are making $500 a month in dividends, you will be glad you did.

Not sure where to start?  Here are several money-saving and money management suggestions that work for us.

We save on just about all our everyday online purchases through Rakuten.  Also, Rakuten gives you $10 just for signing up and using their app.

Ibotta is another excellent cashback app we use to save money.  Be sure to give one or both of these options a try.

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.

Okay.  We are now ready for the last step in our journey to $500 a month in dividends.  That is dividend reinvestment.

5. Reinvest All Dividends To Accelerate Your $500 A Month In Dividends Plan

monthly dividend income portfolio

You have a couple of options for reinvesting your dividends.

Automatically Reinvest Your Monthly Dividend Payments

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.

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 a company with excessive stock value.  Or, a stock you own too much of already.

Accumulate Your Monthly Dividends & Reinvest Lump Sum

The second option is to let your dividends accumulate in cash.  And then when you are making your monthly dividend stock purchases add your dividends collected to the amount you are saving each month.  Then, put that money into the dividend stocks of your choice.

Either of these dividend reinvestment methods is fine.  Each method will increase your dividend income over time.

It’s a matter of personal preference.  And by all means, if you will be tempted to spend your dividends, reinvest them automatically.

Finally, when you achieve your goal of $500 in monthly dividend payments you have the option to stop reinvesting.  That choice is yours.  Once you have achieved your goal!

So now, that concludes the 5 steps to make $500 a month in dividends. Keep at it long enough and you may even become a dividend millionaire!

I would like to recap and summarize the 5 steps to wrap this article up.

How To Make $500 A Month In Dividends – 5 Step Summary

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

More Reading About Dividend Investing For Monthly Dividend Payments

More For Your Monthly Dividends Toolkit

I referenced several tools and resources throughout the article.  Many of which I have used for creating my own income portfolio for monthly dividend payments.

Here they are summarized for your convenience.

Improve your resume
Make some extra side hustle cash
Save on all your online purchases with Rakuten
Use Ibotta to save money
Save money on groceries
Invest in stocks for free with Webull
Dividend stock recommendations from Simply Investing
Investment research from Morningstar
Motley Fool stock advisor
Manage your total financial picture with Personal Capital

Disclosure & Disclaimer: I am not a licensed investment adviser, financial adviser, or tax professional. And I am not providing you with individual investment advice, financial guidance, or tax counsel. Furthermore, this website’s only purpose is information & entertainment. And we are not liable for any losses suffered by any party because of information published on this blog.

I own all of the stocks mentioned in this article.

Now You Know How To Make $500 A Month In Dividends

16 thoughts on “How To Make $500 A Month In Dividends”

  1. First of all, it’s been way too long since I’ve visited your blog. I’m always impressed by the content you produce.

    Second, this was an excellent post. I read every word. I like the fact that you kept the numbers relatively small and not too far out of reach.

    In terms of the number of stocks in my portfolio, I have 22. So, right in the sweet spot I would say. I’ve debated with myself whether I have too many right now since my portfolio value is really small, but I think in the long run it won’t matter (at least I hope). Anyway, $500 per month is a great way to supplement my income in retirement. I think this plan is totally doable, especially since I have over 10 years to go.

    But, I’m secretly hoping to hit AND surpass this goal very soon.

    • Hey DP. Great to hear from you. Hope all is well. I appreciate the kind words about the content here and glad you liked this one post specifically. All the best on hitting your goal. You can do it for sure. Tom

  2. I am working on this right now. I set my goal a little lower for now but I hope to get to $500 eventually. I barely started buying stocks in March of 2020.

  3. I will continue to do further research here in California but can you tell me what kind of taxes are expected on dividend earnings. I assume any income for me is another income for the gov’t……..???

    • I’m not much of a tax expert. But yes, generally most dividends are taxed at the individual level. But it depends on your personal tax situation for both federal and state tax. So, it’s really hard for me to say. I will just throw a number out. Unless you have a really low overall income, you should probably plan for around a 20% rate. Consider investing in an IRA and you can save or defer taxes. Yet another consideration. Definitely do your research or ask a tax accountant. Tom

    • Hi. Yes. There are plenty of good Canadian dividend stocks. And many of them function in a similar fashion to US based dividend stocks. Yes, you can purchase US based stocks too. Many Canadian’s I know do just that, purchase a mix of both. Because it is hard to ignore the US market as a dividend stock investor. Tom

  4. Thanks for all of the info… I enjoyed it and read it all until the very last word.. I’m kind of new to stocks. Been into it for about 4years now. I have about 30 stocks and 25 cryptos.. I have only 6 stocks that pay dividends and I’ve been trying to get more monthly dividend stocks and sell my oldstoxks that are doing nothing and the ones that have been in the negative for a long time and put the money in monthly ones.. anyways…thank you I enjoyed the article..

    • Hi David. Thank you for the kind words. I am very glad you found the article helpful. Making money from dividends is one of my favorite things. That’s an impressive number of cryptos you own and an area I have not ventured into as of yet. Good luck with your investments and repositioning your portfolio for earning monthly dividends! Tom

  5. This is great piece of writing that could enlighten many people that are pursuing financial independence and freedom from debt. Great article

    • Hi Sam. Thanks for the kind words. Dividend investing is a great way to supplement income for retirement, financial independence, help pay bills, etc. I’m a big fan of dividend stocks. And it sounds like you are too. Good luck with your investments! Tom

  6. I will start now thatI discovered from you how most of us can do this.

    Just a suggestion. If you can extend that list of companies that pay 4% or more and categories would cut down alot of research. I like what you have offered so far.

    Thank you,
    John L

Comments are closed.