How Much Do You Need To Invest To Make $100,000 Per Year From Dividends?
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Dividends are one of the most reliable forms of passive income you can find. They might not be as exciting as investing in growth stocks, but if you want to live off of passive income, dividend ETFs or stocks become a great source of that income. In fact, we rank it very highly as it pertains to truly passive income.
Investing In Dividend Stocks
Investing money into growth stocks can lead to higher returns for investors who buy them but they’re also riskier as well because there’s no guarantee that those investments will always make you more money (in terms of growth). They’ll have ups and downs which may not provide a steady income stream for people when it comes down to living off their investment funds.
Dividend stocks are a safer option for many investors. Dividends can fluctuate, but growth stocks can be uncertain and risky. But if all you want is an even payout every so often from shares bought through stock purchases then investing in dividend stocks might be for you.
How Much Do You Need To Invest To Make $100,000 Per Year In Dividends?
The long and short of it, is that it honestly depends on how much risk you’re willing assume in order to make $100k per year in net-income yields.
For instance, there is a scenario whereby you can invest only $1million to make $100K in dividends. QYLD, RYLD, and XYLD, for example, all pay over 10% yearly dividends. If you were to put $1 million into one or spread across all three, you could stand to make $100,000 from dividends annually.
The question is: do you want to assume that risk? If you don’t, then you want to find a blend of stocks or ETFs that A) have a proven dividend track record and B) you know will be around for the long haul. Your yield might be lower, but so will your blood pressure.
When it comes to determining how much you need, the math is pretty simple. Because it is all based on your annual blended yield.
- If your yearly, blended dividend rate is 4%, then your total capital invested would need to be around $2,500,000 to yield $100,000 in dividends per year. If $100,000 per year is what you need to live, then this scenario would allow you to live off dividends without ever touching your principle.
- If your yearly, blended dividend rate is 6%, then your total capital invested would need to be around $1,800,000 in order to yield the same results of $100,000 per year in dividends.
Now, while these two scenarios seem simple enough in theory, creating a diversified portfolio where you make 4% or 6% per year is going to be the tricky part. Why? Well, you probably don’t want to have all your money in one basket. So while some dividend stocks like AT&T pay out 7% annually, you want to protect your downside by diversifying as much as you can.
While we are not investment advisors, we’ve found that a blended portfolio that consists of some ETFs that pay lower dividends mixed with some higher yielding stocks (like the Dividend Kings, which are companies that have raised their dividend for 50 straight years!) or ETFs is a good strategy. Certainly one that can get you to a blended yield of 4-6% pretty easily. You can even push that percentage much higher, however, in doing so, you might have to take on more risk.
Whatever dividend income strategy you choose, should definitely do your own research or check with your investment advisor to find out the best way to maximize your dividend yield without compromising your principle.
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