FULL DISCLOSURE:
I am not a financial advisor. This post is to provide information and not provide financial product advice. I discuss why I personally chose to invest in a stock, ETF, ETNs, CEF, REIT, investment fund or cryptocurrency (which I have held for over a week) and also share information that is public about the following stock, ETF, ETN, CEF, REIT, investment fund or cryptocurrency and they are based on my own personal opinion.
I will not blog about any positions of stocks, ETFs, ETNs, CEFs or REITS and cryptocurrency which were initiated just within the last 72 hours of posting this blog article.
It is recommended that you should always consider visiting a financial advisor for independent financial advice before making investment decisions.
I do not work in the financial industry, so just because I write about it, doesn’t mean you should own it. So, consult with a financial advisor and do your due diligence, RESEARCH!
I am not receiving compensation by the company for this blog post.
I have no working relationship with any company whose stock, ETF, ETN, CEF, REIT or cryptocurrency mentioned in this blog post. Nor do I have a family member or friend who works with the company.
I am a dividend investor. My goal is to one day reach $1,000 in monthly dividend payments, then eventually $5,000 and then eventually receive $10,000 in monthly dividend payments. I know, it’s merely a goal (perhaps just a dream), but can it be done? There are many people who are making over $50,000 in annual dividend payments, granted they started at a young age or they have a lot of money to invest in dividend stocks.
As I’ve said many times, I am a dividend investor who invests in all eleven sectors. This is an offensive and defensive play for a volatile market and if a few sectors underperforms, I expect others to overperform.
But this strategy is not for everyone because investing in stocks and covering all sectors means investing in numerous positions and for me, investing in Dividend Kings or Aristocrats that have weathered many financial storms, can be quite expensive.
But then there are people who focus on one stock, one high yield stock that pays great dividends and literally, put their eggs all in one basket.
Before we get into that, the question is “Is it possible to make $1000 a Month on Dividends with less than $100,000 invested?”.
So, realistically, how much will it take for one to achieve $1,000 in dividend payments per month. Of course, it depends on the stock, but it’s pretty much regarded that $400,000 invested in stocks that yield 3% and this will get you a $1,000 per month in dividend payments.
With my current portfolio, $1,000 in monthly payments would take $204,000 invested and that’s with 135 stocks in all 11 sectors.
But can someone make $1,000 per month without spending $100,000? Mathematically, it is possible.
For example, the REIT (Real Estate Investment Trust) Orchid Island Capital Inc. (NYSE: ORC) costs $5.38 per share (as of the close on June 18, 2020) and this stock pays about $.78 annually, $.06 monthly with a 14.50% yield. That is an insanely high yield.
If you owned 15,385 shares of ORC (which is about $82,771.30 invested overall), that would earn you $12,000 annually ($1,000 per month).
While Orchid Island Capital Inc. has consistently paid their dividends since 2013, people have discussed their strategy of investing in ORC on various dividend forums and focusing on one high yield stock to get their $1,000 per month of dividend payments first before investing in other stocks.
But investing it all in a high yield stock…that is quite risky.
It is risky because a stock with a high yield could mean the following (source: Investopedia):
- A high dividend yield might indicate a business in distress. The yield could be high because the company’s shares have fallen in response to financial troubles, and the struggling company hasn’t cut its dividend yet.
- Investors should scrutinize a company’s ability to pay consistent dividends, which includes examining its free cash flow, historical dividend payout ratio and other metrics of financial health.
- Dividend stocks are vulnerable to rising interest rates. As rates rise, dividends become less attractive compared to the risk-free rate of return offered by government securities.
But those who have done this have said that their goal was strictly for passive income now, they don’t do DRIP (dividend reinvesting), they are not doing it for growth and it was an investment they are willing to take a risk. And there are those who feel they made their initial investment back (as they have invested since 2013) and will continue to reap the rewards that their dividend investment brought to them.
So, if you have $82,771 to spend right now, yes, you can start earning your $1,000 monthly dividend and then invest long term and build up your portfolio from your earnings or with whatever money you do have, but just know, that putting your eggs all in one basket, is not necessarily safe but people are doing it and are willing to take the financial risks.
As people have done with cryptocurrency. People have done the same with Bitcoin and have been used to seeing their crypto fluctuate in the highest of highs and the lowest of lows.
But for stocks, if you choose to go with a high yield, inexpensive stock with a high dividend, you need to be prepared if a company decides to end their dividend payment if their company’s share costs has fallen. And with the discussion of interest rates going up, that’s another risk.
But in the end, it all comes down to your own personal risk tolerance, your financial goals.
Personally for me, again, I like to spread my money to stocks in all sectors and I’m a long-term investor. Do I invest in high yield stocks? I sure do. But I also invest in Dividend Kings and Dividend Aristocrats as well. I know my risk tolerance and I’m quite conservative with my money.
As always, perform your due diligence and do a lot of research before investing. Talk to a financial advisor and find out if investing in a high yield stock would be a perfect investment for you.
