Imagine earning an extra 1000 dollars a month. OK, it’s a decent amount of money, but what’s great about this money is you don’t have to do any extra work for it. It just comes into your bank accounts every month.
That’s what dividend investing is all about. It’s something called passive income income in which you don’t have to work for. Now, what I want to do in this video is go over. How do we achieve this goal? How do we achieve 1000 dollars a month in passive income through dividends? And I don’t care what you say. I don’t care how big your wealth goals are. One thousand dollars is a decent amount of money, especially when it comes from not having to do any extra work. The one bit of work that you do have to do is the initial up front work of learning, dividend investing, or what dividend strategy do we use? How do we pick the right companies and how do we actually get started in the first place? And the thing about getting started is a lot of people look at this milestone of 1000 dollars a month and I think I’ll never get there. That’s too hard. That seems like an impossible goal back. Clearly, these people have not been taught the eighth wonder of the world compound interest. You don’t need to start at immediately getting 1000 dollars a month. No, you start small. You start rolling that little snowball that initially fits in your hand. But as you push it down the hill and as it gets momentum, it becomes easier and it becomes increasingly bigger. And so it’s a massive snowball that can’t be stopped. You know, you may start with just a couple of shares paying one or two dollars a month or every quarter, but then that one or two dollars starts to collect and grow on itself. And you can use that to purchase more shares and it becomes easier and bigger as time goes along. So how do we get started? How do we pick those initial great quality dividend stocks to build and grow from? There’s a couple of things I want to share with you for this. We’re going to use McDonald’s stock as an example. So the very first thing I’d recommend looking at is the forward dividend and payout ratio. So what the four dividend is, is it’s the amounts in dividends that you receive every year, in this case, five dollars.
Yes, that doesn’t seem like much. But don’t forget the principal that I told you earlier on, compound interest does amazing things or you have to do is get this snowball started. So the forward dividend is five dollars. This gives McDonald’s a two point three percent dividend yield in today’s market. That’s not considered too bad. Next thing you need to look at is their earnings. As you can see, it’s currently six point thirty three. That means that McDonald’s and six point thirty three every year per share and they pay out five dollars of that. The other dollar thirty three left over. They used to reinvest and grow their business. Now you need to make sure that the earnings is consistently higher than the dividend payouts. You don’t want them paying out more than what they earn because that means they’re digging into their balance sheets and savings. Generally, it’s just not a good sign. Normally for me, I’d like to see at least 30 percent of those earnings being used to reinvest and grow the business and the rest of the money can be paid out as dividends. The other thing that I check out before buying is, of course, the dividend history. Generally, you want to have a stock that you can look back upon and see dividend increases as time goes along. So if we look at McDonald’s, it’s not too bad. They have increased a lot over the past 12 or so years from a dollar fourteen to four dollars ninety five. The one thing that I would watch out for is they did decrease their dividend in the last recession, which isn’t the best sign. By the way, the site that I use for this is called macro trends, if you want to use it or something. So start with looking at the payouts. What type of dividend yield are we talking about? Look at their dividend history. How reliable are they? The next step is something that I often see dividend investors miss. You need to look at the quality of the company contemplates how is this company going to look in five, ten years time? Will they still have a strong business model? Are they the type of company that is beating their competitors or losing to them? You don’t want any middle of the pack company. Generally speaking, you want those at the top, as Warren Buffett says, buy companies with a strong competitive advantage. I’ll give you a couple of examples of them later on. But the thing is, you don’t need 200 some more dollars to buy McDonald’s stock and start dividend investing. You can start smaller with stocks like Bank of America. That’s twenty five dollars a share. Coca-Cola, that’s fifty dollars a share AT&T. Thirty dollars a share.
There are plenty of smaller priced stocks to start with and then stop shooting from, but the one thing that you do need is to get in the habit of investing your money instead of wasting it on dumb things. Think about how much money you would save if you didn’t buy that daily coffee at Starbucks as an alternative you might want at home or consider how much you would have for investing if you stop buying dumb things on Amazon or avocado on toast. If you think about it, there’s a lot of excess money that you could use directly for dividend investing. Instead, it’s been wasted. If you want to reach this goal of achieving a thousand dollars a month in dividends, you need to change your habits every paycheck that comes in. Instead of thinking, I’m so excited to spend this money, think I can’t wait to invest it and buy some more Disney stock or Pepsi or whatever stock that you found of value in the investing mindset is totally different from the regular person’s buying sets. The regular person gets some sort of short term gratification, but the investor over the long term gets to reach goals like a thousand dollars a month and dividends. That’s passive income. This feeling good in the short term make the decision of which one you wants and then be sure it’s all up to you. But let’s get back onto achieving this one thousand dollar a month and dividends go. I’ve shown you what to look for and a dividend stock. I’ve shown you how to get started in the mindset you need to have. But let me show you now some dividend stocks that I like, which are a great place to start with. 3M is a stock that pays a nice dividend yield, three point five percent. And the thing about 3M, as they have increased their annual dividend for more than 61 consecutive years in a row. So it’s fair to say that their dividend is reliable. Currently, 3M is selling for around a hundred and seventy dollars per share with a market cap of almost 100 billion. The company can be used to expose your portfolio to multiple industries, including US health care, consumer goods and worker safety. They produce over 60000 different products under several brands, so it’s well diversified. Another stock I like is PepsiCo, a very well-known company. That dividend yield is three percent and they have increased their dividends for 48 consecutive years. So again, that dividend is pretty trustworthy. They operate under the consumer staples sector, Sulien, obviously the drink Pepsi, but they also own Gatorade, Doritos, Cheetos, Leis, Mountain Dew and a bunch of other billion dollar brands. Again, a strong company to hold. So these are just some examples of stocks that you may want to start with when getting started and dividend investing. Obviously, you want to make sure you understand the stocks before you buy anything. Those that don’t understand, they normally end up losing over the long term. Trust me, I know. So the goal is to get a thousand dollars a month and dividends completely passive. How much do we need invested in total to get this? And I want to be realistic here. I don’t want to be like those other channels saying it’s easy because it’s not easy. You have to put in the work and the time. So let me show you the answer to the question of how much you need invested to get a thousand dollars a month in dividends.
So let’s say our average dividend offers around a three percent yield per year. That means if we put in a hundred thousand dollars, we will get three thousand dollars a year. So we wouldn’t need to have four hundred thousand dollars invested and total to get twelve thousand dollars a year, which is of course a thousand dollars a month, and be aware that a lot of stocks will only pay dividends every quarter. So that could just be three thousand dollars every three months. Now, a lot of people would look at this figure and think, nah, that’s impossible to get 400000 dollars invested in the stock market. But guys, it’s doable. Again, think of the snowball effect when you initially start that snowball. It’s tiny, but once the bulls rolling, it ends up getting very big. This is why that famous book written on Warren Buffett was called The Snowball Effect. To show you this exact same principle. Most won’t even bother learning. That’s yes, alone. Try TriNet. But those who do, they are the ones who end up earning a thousand dollars a month and passive income. But you can’t just be an OK or an average or a bad investor. You need a goal of trying to be a high quality investor, of being able to pick out those companies that are at the top of their game and will continue to be so. And three, five and ten years time. You need to be able to pick those companies that have reliable dividends, a strong history. And of course. A strong future with dividend payments that you want those companies with quality leaders like Steve Jobs back in the day or Jeff Bezos today as an investor, you got to do your research and make sure you understand all of these different parts. But you got to start somewhere. You got to start by sometimes being a bad investor, maybe stop playing those video games and decide to start learning, investing, maybe stop wasting your money, poteen, and put it towards dividend stocks.
That’s how you begin the game of growing a dividend portfolio and eventually earning up thousands of dollars a month in passive income. Like me, you know I don’t game, I don’t party. But I’ll tell you what I do do. And that’s invest my money.