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Dividend-paying stocks can be a very good source of passive income. By investing in small amounts on a regular basis, you could build a portfolio that pays out a significant income over time. Here's how investing $200 per month might create $25,000 in annual dividend income over time.
The Basics of Dividend Investing
Dividend investing is the act of buying stocks that pay regular dividends-small payments made to shareholders out of a company's profits. You can use those dividends to buy more shares, which increases your income over time.
The Goal: $25,000 in Annual Dividend Income
To get to $25,000 in annual dividend income, you'll need a portfolio of around **$714,286**, assuming a 3.5% average dividend yield. Here's the simple math behind it:
Example :
Annual Income = Portfolio Value × Dividend Yield
25,000 = 714,286 × 0.035
Investing $200 Per Month
If you start investing $200 per month and reinvesting your dividends, you can watch your portfolio grow over time. Assuming an average annual return of 7%, it would take roughly 28 to 29 years to reach the target of $714,286.
Using the Schwab U.S. Dividend Equity ETF
One great way to make investments in dividend-paying high quality stocks is an ETF called Schwab U.S. Dividend Equity ETF (SCHD). The funds contain the better dividend-paying corporations like Pfizer, AbbVie, Coca-Cola, and PepsiCo. As attractive as it could be, those are some of the ETF's high dividend-yielding holdings ranging between 2% and 6.8%.
Here are 10 popular dividend-paying stocks that have a history of consistent dividend payouts and yields:
1. Pfizer (PFE) -Dividend Yield: 6.4%
A pharmaceutical company with solid dividend payouts.
2. AbbVie (ABBV) - Dividend Yield: 3.6%
A biopharmaceutical company with stable dividends.
3. Coca-Cola (KO) - Dividend Yield: 3.2%
A well-known worldwide brand with years of paying consistent dividends.
4. Cisco Systems (CSCO)- Dividend Yield: 2.7%
A technology stock with a well-established dividend pay-out history
5. BlackRock (BLK)- Dividend Yield: 2%
A Global investment management corporation that pays good dividends.
6. Bristol Myers Squibb (BMY)- Dividend Yield: 4.4%
A leading pharmaceutical company with increasing dividend payments.
7. Texas Instruments (TXN) - Dividend Yield: 2.8%
A semiconductor company with a history of steady dividend increases.
8. Verizon Communications (VZ) - Dividend Yield: 6.8%
A telecommunication company with a high dividend yield.
9. Amgen (AMGN) - Dividend Yield: 3.7%
A biotechnology company with good dividends and growth potential.
10. PepsiCo (PEP) - Dividend Yield: 3.7%
A consumer goods giant with a history of paying reliable dividends.
All of these stocks are included in the Schwab U.S. Dividend Equity ETF (SCHD), which provides access to a broad group of high-quality, dividend-paying companies. They are stable and known for consistent dividend payouts, which makes them an attractive choice for long-term dividend income investors.
End
With $200 invested each month into a solid dividend portfolio like SCHD, one can slowly and surely build up his wealth. It will be years before that translates into an annual dividend income of $25,000; however, starting early and remaining consistent with this strategy can help a person build up a reliable stream of income in the future.