Whether you are just entering the investment world or are already an experienced investor, you may well be looking to get the best dividend returns for your cash.
Let’s get up to speed. Dividends are the earnings that you get back from a company in which you have invested, based on the company’s profits, the stake that you have in the company, and the amount that the company’s board of directors allocates.
Many investors choose these companies in order to make passive income on the side – and if you play it right, you could make some serious revenue.
By doing your fair share of research, spending more time, and sometimes, by taking educated risks, you can increase your dividends to the point of even earning four figures a month.
But how do you make £1,000 a month in dividends? How much will you need to invest, and how can you guarantee monthly returns? Let’s take a closer look.
How much do you need to invest to make £1,000 a month in dividends?
There are a few things you’ll need to consider if you really want to hit that passive £1,000 per month target. It’s entirely possible, but you might be looking at a portfolio of around £400,000 in size – not a figure for the faint of heart!
It’s the dividend yield you need to consider when working out your passive returns. The yield is calculated by dividing your yearly dividend per share by the current share price. A high dividend yield will grant you a maximum payout, but it’s unlikely to do much in terms of growth.
It might therefore be worth looking into smaller yields that you can build up over time. It’s never a good idea to go charging into large yields to begin with, as they are not only tricky to keep up to, but they likely won’t sustain you over time, either.
What should I invest in?
Before you start making any strides in company investments, it’s important to consider which avenues to choose. By this, I don’t necessarily mean the specific companies, but the types of investment available to you.
To gain dividends, you’ll generally have the choice between individual stocks, or ETFs. As you may know already, ETFs bring together a range of different options so that you can diversify your options. Therefore, if you really want to maximise your chances of making that cool £1,000 per month, it may be worth taking more options than a little.
It’s worth looking into individual investments if you know that a company is likely to deliver results regularly – however, you’re more likely going to reap regular dividends from a global leading ETF than a single investment. Mathematically, it just makes sense!
What to consider before investing
Naturally, I’d never suggest leaping straight into an investment just for the dividends without considering a few important points first.
Of course, the first thing to consider is how much you want to actually invest. There is always going to be risk, and just because the initial maths suggests that you could make £1,000 per month from dividends, doesn’t ever mean it’s a guarantee. Beyond this, never invest more than you can afford – keep an eye on your outgoings and don’t over-stretch, no matter how positive the signs may be.
It’s also a good idea to avoid investing purely because the dividend yield is healthy. A big company with an equally big yield will naturally be very attractive in the first instance – however, smaller investments in smaller companies are more likely to grow over time. Dividend investing doesn’t always have to be about the long game, but if you really want to thrive on growing your passive income, it pays to think smaller, at least initially.
Finally, remember to take your time. If you are just starting out in the stock market, and have the time to watch things grow, change, and to learn, then you should! Again, do not invest in something simply because it has a high dividend yield. Instead, focus on growing your smaller dividends.
That means taking the time to research the current market, budding companies, and learning how to read the signs. Getting £1,000 a month in dividend income isn’t a race, and even if it was – it’s a marathon, not a sprint! If you are looking for quick ways to generate passive income, dividend investing is perhaps not the best avenue for you to take.
How to get paid dividends monthly
Beyond working out how to get paid a specific amount of moment via passive dividends, you should of course consider how to actually get paid out per month. There are a few ways through which you can attain this.
The most obvious way of receiving dividends monthly is by only investing in monthly paying dividend stocks! These, however, are quite rare, and will not necessarily help you in growing a diverse and healthy portfolio. It’s worth thinking a little more outside of the box.
It’s therefore worth taking the time to research the dividend payout days for each individual stock or ETFs that you are interested in.
Most dividends are paid quarterly, as discussed above. Thankfully, most companies follow one of three common dividend payment patterns, each of which follows the trail of the first month in the quarter.
January payouts, for example, are then going to be followed by April, July, and then October. February payouts move one month along – you’ll get your payments in May, August and then November. The key here is to line up different ETFs or shares that stagger across the year – so that you always get some form of return each month, with each of your investments taking it in turns. It’s a pattern that can work well if you plan ahead.
Again, it is essential to remember that not all companies will work on this basis, and nothing is guaranteed to convert. No matter how much care you take in your research, and your investment, there is no guarantee of success. That – again – is the golden rule. It’s entirely possible to make £1,000 per month from dividends, but it’s going to take time, effort, and planning.
A wise investor can make a good living from their investments, or at least make a comfortable side income. However, it’s going to take quite a bit of reading, a handful of mathematics, and plenty of risk analysis. There’s also no guarantee you’re going to get the passive payday you’re looking for straight out of the gate. It takes time!
You should be looking at dividend investing as a long-term plan. If you want to know how much to invest to make £1,000 a month, you are only looking at the smaller picture. You’ll need to find diverse opportunities – and you’re going to need to keep reality in check before you put all of your eggs in one basket.