Are you looking to build a portfolio of dividend stocks but don’t know where to start? I like to set small achievable goals for myself and then expand on them as I begin to reach certain thresholds. My first goal in building my income portfolio was to earn $25 per month in dividend income.
Earning $25 per in dividends may not seem like a lot, but it calculates out to an extra $300 per year in income. The nice thing about that extra $300 in income is that an investor does not have to do any work to earn it (once the stock is purchased). Assuming the investor builds a solid portfolio of dividend paying stocks, the annual income earned from dividends will likely increase over time.
As a small investor just starting out, my plan was to set a manageable goal of averaging $25 per month in dividends. This is a small but necessary step in my long range goal to earn $1,000 in dividends. Here is how I accomplished this first goal –
How I Earn $25 in Dividend Income
Since I have reached the threshold of earning $25 per month in dividends, I thought it would be good to show how I have accomplished this goal. As of my last report, my 3-month rolling average for dividend income was $23.48. I estimate that on my next report, I will be averaging well over $25 in dividend income based on my current holdings.
At the time of this writing, I own 12 dividend stocks in my portfolio with an average yield on cost of 4.4%. I have approximately $9,000 invested in these stocks which should translate into $33 per month in dividends. My 3-month rolling average is a lagging calculation which is the reason for the difference between the two monthly income numbers (i.e. $23.48 & $33).
My longer range goal for this current year is to earn $500 in dividends (not $300), which will average out to $41.67. Now that I have reached an average of $25 per month in dividend income, I want to keep the momentum rolling. I want to duplicate my results so that I can earn $50 per month in dividend income. Then I will start pushing for $100, then $200, and on.
As you can probably tell by now, earning dividend income will play a large role in my family’s financial future.
How You Can Earn $25 per Month in Dividend Income
Earning $25 per month in dividend income is not all the difficult to achieve. You can start with an initial investment amount of $8,500 and quickly reach this goal. At an average dividend yield of 3.5%, an $8,500 investment would generate approximately $297.50 in dividends annually.
Initial Investment Amount – $8,500
Average Dividend Yield – 3.50%
If properly managed, a portfolio like this could double the amount of income earned annually in 10 years’ time with no additional investment. Assuming an average 8% dividend growth rate each year, this same portfolio would return $600 after 10 years. There are few other investments that can accomplish these same results.
Even a small goal to earn $25 in dividends is an important step in building a solid portfolio of income stocks.