I started buying dividend stocks in 2018 because I hated my job. Not the people or the work, just the fact that somebody else decided whether my income kept showing up, and once a year told me how much m raise would be.
That number was usually about 3%, but sometimes it was also nothing.
Most people who try to fix this set the goal wrong on day one. They try to increase their active income, without ever building a stream of income that isn’t correlated to their time. Dividends are the easiest way to build that income stream and it doesn’t require you to build a business, manage anything, or even pay attention to it. If anything, dividends should serve as the motivation to start investing your income.
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You Already Have Two Employers
You want to learn how to start investing into the stock market and earn dividends, you can start with the article below. New free subscribers also get an email that continues a list of ETFs that may be great for beginners.
Every dollar you own in a dividend paying position is a coworker that shows up, does its job, and hands you money without a performance review. The whole strategy comes down to shifting your income from the employer that can fire you to the one that can’t. Dividends get paid to you regardless of the economy and isn’t dependent on your time and effort. You can go to sleep and wakeup with new dividends deposited into your account. You just need to understand where to put the money.
For instance, I collect a few thousand in dividends every month, which serves as safety against unexpected issues. My car needs some repairs and I don’t have cash? Dividends can be tapped into. If I go on vacation, I’ll still be getting paid without actually producing anything. Dividends can be a cheat code but it takes patience to build them up over time.
Look at the raise policy first, because it’s the thing that made me start. My job gave me 3% and I had to earn it in a room full of people deciding my worth. You ever worked your ass off and didn’t get a raise for the effort? Or how about when a coworker quits and now you have to pickup the slack without any extra pay?
Well, my portfolio gives me a raise every time a company inside it grows earnings, and a second raise every time I add capital, and neither one requires anybody’s permission.
Then look at the firing risk. Employer A can end your income in a single meeting you didn’t see coming. Dividends can’t fire you.
The worst that can happen to a dividend is that it gets reduced, and you can see that coming in the filings months ahead if you’re paying attention. I wrote about building income that survives a downturn in The Recession Proof Dividend Structure.
The Yield Decides How Long It Takes
So how much money do you need to start earning dividends? Well, you can technically start with as little as a dollar. However, the amount you invest into the market has a direct reflection on dividends that you can collect.
The decision comes down to you. Treat your investing like it’s a bill. If you can commit $500 to a car payment every month, but not $500 to your investment account, you are hustling backwards and keeping yourself financially stuck.
Meanwhile, $500 a month into an investment account can build some serious wealth over time.
The formula is: Amount x Yield = Dividend Income
You can create a $500 a month income stream with as little as $43k invested. Of course, this isn’t the most optimal way to invest and it isn’t a recommendation. This is just a conceptual idea to help you understand the power of where your capital is being allocated.
An index fund at 1.3% needs almost half a million dollars to cover one car payment, which is why the “just buy VOO” crowd talks about quitting at 55. My portfolio sits mostly in the 8% to 12% range, across the funds I covered in I Analyzed 10 Option Income ETFs and Low Risk 10% Dividend Yield From One Fund.
Right now there’s one fund I’m adding to more than any other, and it exists because of the fuel crisis. Crude went above $90 in March when the Strait of Hormuz got constrained, gasoline is up 27% year over year, and everyone is guessing where oil goes next. This fund doesn’t care where oil goes, and it pays me every month.
Here’s the fund that I think will perform well through the remainder of the year..
I initiated a buy alert on this fund at the beginning of the year and it has done well since.
