How To Create Passive Income Using Dividend Stocks.
So you want to create a dividend stock portfolio that creates passive income and cash flow? Then be ready for some great tips on the topic, dividend stocks are a great tool to building one of many passive income streams. Then now we will quickly talk about, what exactly is dividend stocks?
A dividend stock is a stock that pays out dividends per stock, they can pay you either quarterly or monthly. The payout you get is highly dependent on the stock price and if they payout from a reserve or their profits. You probably think it's highly complicated, but I will break it down for you, so even you can understand it, and of course use it.
Choosing Monthly Payout Dividends
As said before you can buy dividend stocks that either pay monthly or quarterly, we will be aiming for those stocks, that payout dividends monthly, to create that consistent passive cash flow.
When choosing stocks, you of course will need to do your own research, but here are some examples: Dividend aristocrats are stocks that have a 25+ years history of annual increases, and Dividend Kings have a 50+ years of history.
A good tip is to research what the dividend stock you're about to buy works with, for example if we take Global Partners LP (GLP) which is a stock that i have bought that pays dividends quarterly, i bought it back in february and it's up by 12%. Before I bought this stock, I researched what they were working with (if you want to know, go research, take it as training). I then realized what they were working with would be highly significant in the future, and I took the chance and invested in it, which paid off great. So always remember, always do your research, and never put in more money than you are willing to lose.
Figuring Out The Amount Of Money You Need
The amount you will need to invest in a dividend portfolio is very dependent on your monthly dividend payout goal. You will need a lot of money invested, to achieve a decent income, but don't let that discourage you. If you just stay consistent and keep investing for example $50, you will eventually reach your monthly goal.
While you may think that stocks with higher dividend yields will help you achieve your goals faster, you should definitely think twice before investing in a dividend stock with a high yield. Stocks with higher dividend yield can be of a concern with the company, or the dividend yield can be at risk of getting a dividend cut.
Therefore it is way better to start with a smaller goal, and a smaller dividend yield, and then work your way up into the big leagues. Just remember that instead of you using the money, or the money just sitting in the bank, they generate money for you. It's gonna take time, but be åatient and you will be rewarded.
Choosing The Right Stocks
There are different payment patterns when it comes to dividend stocks, the most common ones are quarterly paid stocks, they payout 4 times a year, every quarter, if you invest in these, you will need to invest in stocks that payout in different months of the quarter. Therefore I just invest in stocks that pay monthly dividends. They pay a lot less, but I'm sure I get a payout each and every month, and therefore I can grow my monthly income passively.
But if you decide on quarterly stocks, then don't buy stocks just because they payout the right months. Buy stocks backed up by research you have done yourself, and research what they work with, if the market they work on is on an uprise or downrise and so on.
Things To Remember While Building Your Portfolio
You will probably get some paperwork at the end of the year, regarding the taxes you need to pay on your stocks. Therefore remember to check the tax rules, in your country, and or talk with a specialist on the topic.
Be sure to check the ex-dividend date, so you don't get disappointed, if you aren't paid the first month. The ex-dividend date is the date you will need to have the stock, for it to pay that month, of that quarter, if you buy a day after you have to wait till the next payment after.
Wrapping Up
I hope all of these tips and tricks help you build up your portfolio, and achieve your monthly income dreams. But always remember dividend stocks, and stocks in general are always a long game, you will need to stay consistent, and then before you know it, you have achieved your monthly income goals. Of course I would recommend not focusing on your dividend stocks, focus on a side hustle, a job and just let your dividend stocks do their thing, even though they go down in price, you will still get your dividend payout. If you got any questions feel free to comment!
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