Options For Investing $100,000 In Dividend Stocks
The purpose of this article is to discuss how much you make in dividends with $100k. And illustrate several different dividend portfolio options for going about it.
Maybe you have come into some money. And want to invest it in dividend stocks. If so, congratulations!
Or, perhaps you are ready to start saving aggressively. To build a $100K dividend stock portfolio.
Whatever your situation, let’s get today’s investing journey started. And see how much you can get from dividends with $100k…
Disclosure: At no cost to you, I may get commissions for purchases made through links in this post.
How Much Can You Make In Dividends with $100K?
The exact amount of dividends you can get with $100k depends on your portfolio’s dividend yield.
Allow me to demonstrate this point with a table. Representing a possible range of options…
Table 1: Potential Dividend Income From A $100K Dividend Stock Portfolio
|Portfolio Dividend Yield||Dividends on $100K|
This brings me to a logical question.
If portfolio dividend yield dictates the dividend income from a $100,000 investment in dividend stocks.
Then what is this concept?
Please allow me to explain…
What Is Portfolio Dividend Yield And How Is It Calculated?
First of all, a portfolio’s dividend yield is the weighted average dividend yield of the individual stocks owned.
It is calculated by adding all of the dividend income received from each stock holding for an entire year. And dividing it by the total market value of the portfolio.
Furthermore, the dividend yield of each of your stock picks will influence your overall portfolio’s yield.
Thus, the specific stocks you choose play a big role. Because they will ultimately determine how much in dividends you get from your $100k investment.
Finally, you can look up the dividend yield of any stock that interests you. Doing so online is quick and easy.
For the record, a stock’s dividend yield is calculated as the current annual dividend rate per share divided by the stock price.
Okay. With that background information in mind, let’s look at several options. With entirely different portfolio dividend yields.
Thus each option will deliver a different amount of dividends from your $100k investment…
Option 1: A $100K Dividend Portfolio For A Lot Of Growth And A Little Income
First, in this dividend portfolio example, we are going to choose Dividend Aristocrats.
Aristocrats are stocks that are part of the S&P 500 stock market index. And have also paid and increased their dividends per share for at least 25 years in a row.
These stocks typically have lower dividend yields. But increase their dividends every year. Thus, they are considered dividend growth stocks.
Here’s a model portfolio of Dividend Aristocrats…
Table 2: $100K Invested In Dividend Aristocrat Stocks
|Automatic Data Processing (ADP)|
|Exxon Mobil (XOM)|
|Hormel Foods (HRL)|
|Johnson & Johnson (JNJ)|
|McCormick & Company (MKC)|
|NextEra Energy (NEE)|
|Procter & Gamble (PG)|
|Realty Income (O)|
Based on my experience, it’s fair to assume that an average investor like you or me can build a $100k portfolio entirely from the Dividend Aristocrats list.
By selecting 10 or so stocks from the more than 60 Aristocrats that are in existence today.
By doing so, expect a portfolio dividend yield of about 2%. Maybe a little more or less. Depending on the exact stocks you select.
And we know this from table #1 above. That a $100K dividend portfolio with a 2% yield will generate $2,000 per year in dividends.
Just about $200 a month in dividend income. Not quite, but getting close.
Now that sounds okay. But you might be looking for more dividend income than that. And I can’t say that I blame you.
So, let’s look at another option for a $100,000 dividend stock portfolio…
Option 2: Investing $100K In Dividend Stocks With Higher Dividend Yields
This time we are going to shoot for stocks with higher dividend yields.
Because we know stocks with higher dividend yields will increase the yield on our overall portfolio. Thus, increasing the value of dividends made from a $100,000 investment.
To do this, I went to my portfolio. And searched for stocks that yield about 5%.
This is what I came up with…
Table 3: $100K Invested In Higher Yield Dividend Stocks
|W.P. Carey (WPC)|
|Philip Morris (PM)|
|International Business Machines (IBM)|
|3M Company (MMM)|
Now, with a $100K dividend portfolio like this one. Yielding about 5%.
Maybe a little more or a little less depending on your exact stock picks. And how much you invest in each stock.
You can earn $5,000 per year in dividends.
Furthermore, by getting more aggressive with your stock selection. And narrowing down your stock picks to only the highest yields. Then $6,000 a year is certainly possible.
That annual amount translates to making $500 a month in dividend income. A nice round number.
So, what’s the drawback to this line of thinking?
Why would anyone invest in stocks with 2% dividend yields? When 5% dividend yields are available.
That is a good question! And the answer is…
Limited Growth And Less Dividend Safety
Because higher yield stocks tend to grow less rapidly. Offering less capital appreciation. And slower dividend growth rates.
Their dividends may also be a bit riskier.
Meaning there is a greater possibility for little to no dividend growth. Or, in the worst case a dividend reduction.
Want to search for higher-yielding stocks? If yes, you can do a similar process with an online tool. Searching for stocks with 4%-6% dividend yields.
My favorite is the Simply Investing Report & Analysis Platform.
Simply Investing provides an interactive database. With all the dividend metrics for hundreds of dividend stocks.
Plus recommendations on the best dividend stocks to buy. And when to buy them.
Next, let’s look at another option for our $100,000 dividend stock portfolio…
Option 3: Get More In Dividends With $100K Using A Closed-End Fund
This time we are going for big-time dividend income. By considering a closed-end fund.
Closed-end funds are a type of mutual fund. They issue a fixed number of shares through an initial public offering of the stock.
Investment decisions are made by professional managers. And the fund shares can be bought and sold just like a stock on the stock exchange.
There are closed-end funds for many different types of investments and investment approaches. They can also use aggressive strategies to produce dividend income.
- Investing with borrowed funds (using leverage)
- Trading stock options
- Selling appreciated stock to produce cash for dividends
- Using dividend capture strategies
One such fund of this kind is managed by Voya. It is their Emerging Markets High Dividend Equity Fund (ticker symbol IHD).
Editors note: I do not own this fund and never have. Nor am I recommending it. I’m just using it for example purposes.
Because as of the date of this article, this fund’s dividend yield is a whopping 10%.
So, a $100k portfolio invested in IHD will produce $10,000 in annual dividends.
But! You knew there was a but coming didn’t you?
Be Careful With Aggressive Funds Paying High Dividends
First, closed-end funds like this tend to come with more investment risk.
Second, dividend distributions are sometimes made up of returns on your capital. Not dividends in their most traditional sense.
As a result and based on my experience, these types of funds can get hammered. Especially during bear markets and difficult economic times.
They also have higher fees. Versus passively managed exchange-traded funds (ETFs).
Speaking of fees and investment costs. Make sure you buy and sell your dividend stocks and funds for free.
To do so, I use the Webull app. It’s fast, free, and has great research and trading capabilities.
To sum it up, high-yield closed-end funds are an option.
One or more can play a productive role for an investor. Who wants to earn $10,000 of annual income from their $100,000 diversified dividend portfolio. But they can also be quite volatile.
Next, one final possibility for your one hundred thousand dollar dividend portfolio building consideration…
Option 4: Use A Hybrid Strategy For Dividends On a $100K Investment
Options 1, 2, and 3 are not mutually exclusive. Since you can use elements from each.
To customize your $100k dividend portfolio. And generate the exact portfolio yield to your liking.
For example, invest in a few lower-yielding Dividend Aristocrats. Select several stocks with dividend yields between 4% and 6%. Plus add a small amount to a high yield closed-end fund of your choosing.
Thus, tailoring a portfolio. Made up of the best selection of stocks that meet your requirements.
Next, a couple of FAQs…
FAQs About Dividend Yield And A $100K Dividend Stock Portfolio
Before I wrap up, allow me to address a couple of frequently asked questions (FAQs) regarding dividend yield.
Since so much of today’s discussion about a $100K portfolio revolves around that topic…
Is A High Dividend Yield Good Or Bad?
I consider high dividend yields to be neither good nor bad. They are typically an indicator of stocks with greater dividend risk, slower dividend growth prospects, or both.
What Is A Good Dividend Yield?
A good dividend yield is high enough to meet your dividend income requirements. But not too high where dividend safety and continuation of future dividend payments are in doubt.
In my opinion, dividend yields with the best characteristics typically fall between 3% and 5%.
How Much Can You Make In Dividends with $100K?
So, if you have been asking yourself this question: how much can I get in dividends with $100k?
And have been thinking about building a $100K dividend portfolio with different types of dividend stocks.
Then I hope you enjoyed today’s article. And found it helpful.
Before you go, be sure to check out all of our…
…perfect for improving your dividend investing game! And increasing your dividend income.
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.