avatarEthan Ginsberg

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How to Earn An Extra $2,460 in Dividends

Quarterly dividends made easy

Photo by PiggyBank on Unsplash

Please note: This article is for informational purposes only and should not be considered financial advice. Always consult with a financial professional before making any major investment decisions.

Imagine waking up to a notification that you just received $615 in your brokerage account.

You didn’t have to do anything.

The money came on its own.

Best of all, it will show up again in 3 months and likely as a larger sum.

This cycle will happen indefinitely.

Sound like magic or too good to be true?

Anyone following various investment communities this past week could not escape the buzz of dividend payouts.

For those of you unfamiliar with dividends, they are a distribution of a portion of profits from companies to their shareholders.

As opposed to the money being reinvested directly into the business, a small percentage of the profits are distributed to the shareholders giving them the freedom to reinvest the profits as they see fit.

Dividend payouts

Dividends typically are distributed on a quarterly schedule, a few weeks after a company’s quarterly earnings reports.

They show up as a dollar value per share.

For example:

The Walt Disney Company: DIS, recently announced a 0.30 cent per share dividend payout scheduled for January 11, 2024.

Every share of DIS stock owned before the ex-dividend date, December 11, 2023, will receive a 0.30 cent payout.

I own about 112 shares of DIS, so on January 11, I will receive about $33 in my brokerage account.

It takes money to make money

While $33 doesn’t sound like much for almost $10,000 invested, that’s only a quarterly dividend. Should Disney decide to continue to pay that dividend, I will receive about $133 through 2024.

Cash, in my account.

Still not impressed?

Neither am I.

Let’s look at this in larger numbers.

What if I have $150,000 invested in an index fund with a 1.64% dividend yield?

Note: a dividend yield is another way of saying the percentage of a share price that’s returned to shareholders.

VOO — The Vanguard Index Fund that tracks the S&P 500 has about a 1.64% yield.

This past month, VOO was trading for about $400 (average).

$400 x .0164 = $6.56 This would be the annual dividend distribution

In reality, the annual distribution for 2023 was $7.20 per share.

If you had $150,000 invested in VOO this past year:

$150,000 x .0164 = $2,460

Divide that by the four payouts:

March 2023: $615

July 2023: $615

October 2023: $615

December 2023: $615

Please note the numbers, in reality, are +/- a few dollars based on fluctuations in the dividend yield.

Either way, you would have woken up with about $615 in your brokerage account this past week.

Not too shabby.

It’s a marathon, not a race

The only way to make significant money from dividends is to have a lot of money invested.

For most of us pions, it will take a long time for us to build up a large enough nest egg for the dividends to make an impact.

All good things take time though.

In my opinion, here’s my two cents:

  • Start small, invest what you can, and increase the investments over time.
  • DRIP (auto-reinvest) the dividends automatically to help grow your portfolio.
  • Diversify among broad, low-cost index funds (VOO, VTI, VIG, VBR).
  • Play the long game, continue investing, and go on with your life.

In the long run, it will pay off.

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Investing
Dividends
Finance
Money
Personal Finance
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