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Many investors dream of passive income. Not relying only on a paycheck can free you up to pursue your dreams, get you closer to retirement, or provide a solid safety cushion for potential times of trouble.
Dividend investing can be a way to build a nest egg and let your money work for you. Getting to $1,000 in monthly income means you would have to generate $12,000 in dividends annually. To do that, you must have stocks meeting a few criteria. They have to provide a consistent and stable dividend payment. Some high-yield stocks can be tempting, but peering at the dividend history may reveal dividend cuts or pauses. The company’s health, the sector it is in, and the strength of the balance sheet all help determine which stocks can go the distance.
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Can you generate $1,000 in monthly income using just four dividend-paying stocks? This portfolio would aim for yield and reliability, focusing on industry diversification. Assuming an average dividend yield across four stocks is around 4%, the total investment needed would be around $300,000 to generate $12,000 annually at a 4% yield.
Choosing The Right Stocks
A mix of stocks from different sectors can balance risk while targeting high and stable dividend yields. These might include:
1. Altria Group, Inc. (NYSE:MO)
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Sector: Consumer Staples (Tobacco)
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Dividend Yield: 7.6%
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Why: Altria has a long history of paying high dividends despite operating in a declining industry. Its high yield helps meet income goals faster.
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Watch For: Revenue for the company’s smokeable products declined by 5.6% in the second quarter of 2024. The company is transitioning toward more smoke-free offerings. Investors will want to keep tabs on the company’s progress in that area. “We’re confident in the long-term outlook for our smoke-free portfolio, and we have a significant opportunity to responsibly lead the transition of adult smokers to a smoke-free future,” said Billy Gifford, Altria’s CEO, during the second-quarter earnings call.
2. AT&T Inc. (NYSE:T)
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Sector: Telecommunications
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Dividend Yield: 5.29%
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Why: While AT&T has faced challenges, it maintains a strong dividend. It operates in a cash flow-heavy industry, which supports stable dividends over time.
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Watch For: As one analyst said, AT&T needs to manage “growth and profitability.” That means expanding the mobility business and preparing for the broadband future. “This story is about growing customers and profitability as our consumer wireline business delivered more than 7% EBITDA growth during the second quarter. This was driven by approximately 18% growth in fiber revenues and improved operating leverage as we transition from legacy networks to advanced broadband infrastructure,” said AT&T CEO John Stankey on the second-quarter earnings call.
3. Realty Income Corporation (NYSE:O)
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Sector: Real Estate (REIT)
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Dividend Yield: 5.06%
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Why: Realty Income is a REIT known for paying monthly dividends, offering stability and regular income. It’s a strong choice for consistent cash flow.
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Watch For: Investors will want to track how Realty Income handles debt. In August, it announced a $500 million public offering of 5.375% senior unsecured notes due 2054, with an effective yield of 5.486%. The company has also signaled it may be quicker to sell some properties. “As we continue to calibrate and hone our predictive analytic tools, advancing our investment pieces on each property in our portfolio, we may be more active on dispositions than in the past,” said Realty Income CEO Sumit Roy on the second-quarter earnings call.
4. Johnson & Johnson (NYSE:JNJ)
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Sector: Healthcare
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Dividend Yield: 3.02%
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Why: Though it has a lower yield than the others, J&J is highly stable and has a strong record of dividend growth, making it a good defensive stock.
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Watch For: Johnson & Johnson is deepening its exposure to medtech through strategic acquisitions. Last month, it announced paying $1.7 billion for V-Wave, a medical device company focused on cardiovascular issues. “We continue to advance our pipeline, launch new commercial products, and integrate strategic acquisitions that broaden and further differentiate our portfolio,” said Joseph Wolk, the company’s Chief Financial Officer, on the most recent earnings call.
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Adjusting The Allocation
Given the different yields, we would allocate more capital to lower-yielding but more stable stocks like Johnson & Johnson and Realty Income. Higher-yielding stocks like Altria and AT&T could require less capital. The combined yield of these four stocks is 5.2%, meaning it could take less than $300,000 to reach that $12,000 yearly goal.
These are just assumptions, and investors will want to remember that high-yield stocks like Altria and AT&T come with more risk, while J&J provides stability but a lower yield. Each stock’s dividend payout ratio and financial health must be monitored to ensure sustainable dividends. Although this portfolio is diversified across sectors, it’s still important to review it regularly. Diversifying into other stocks, bonds, and real estate can provide additional income and safety against broader downturns.
Another Way To Build Wealth
The current high-interest-rate environment has created an incredible opportunity for income-seeking investors to earn massive yields, but not through dividend stocks… Certain private market real estate investments are giving retail investors the opportunity to capitalize on these high-yield opportunities and Benzinga has identified some of the most attractive options for you to consider.
For instance, the Ascent Income Fund from EquityMultiple targets stable income from senior commercial real estate debt positions and has a historical distribution yield of 12.1% backed by real assets. With payment priority and flexible liquidity options, the Ascent Income Fund is a cornerstone investment vehicle for income-focused investors. First-time investors with EquityMultiple can now invest in the Ascent Income Fund with a reduced minimum of just $5,000. Benzinga Readers: Earn a 1% return boost on your first EquityMultiple investment when you sign up here (accredited investors only).
Don’t miss out on this opportunity to take advantage of high-yield investments while rates are high. Check out Benzinga’s favorite high-yield offerings.
This article How Much Would It Take To Earn $1,000 A Month In Dividends With Just Four Stocks? originally appeared on Benzinga.com
