Want To Make an Extra $1,000 a Month? This Stock Strategy Makes It Easy

Passive income is a myth — unless you’re talking about dividend stock investing.

And while earning an extra $1,000 through a side hustle, online business, or even a second job can feel great, earning truly passive income for doing (almost) nothing feels better.

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If you want to build a dividend stock portfolio that pays out $1,000 a month, you’ll need to follow the stock strategy outlined in this article. And while it can take time to build a truly passive income dividend portfolio, it’s absolutely worth it.

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What Are Dividend Stocks, and How Do I Invest?

Dividend stocks are shares of stock in a company that pays out excess profits to shareholders in the form of a quarterly dividend. Most companies that pay out consistent dividends are larger businesses that are profitable. The dividend is a reward to investors for buying and holding shares of stock.

You can invest in dividend stocks through most brokers or popular investing apps (like Robinhood or Public). When you look for a dividend stock, most brokers will list the annual dividend “yield,” which is the percentage of the share price that you’ll earn each year.

For example; If you buy a dividend stock with a 3% yield and a $100 share price, you’ll earn $3 each year for every share of that stock you own.

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How To Build a $1,000 a Month Dividend Stock Portfolio

If you want to earn a cool $1,000 monthly on autopilot, you’ll want to put together a dividend stock portfolio that consistently pays out a high dividend rate. Now, most dividend stocks don’t pay out monthly, so you’ll need to plan on making $3,000 every quarter instead.

First, let’s look at what average dividends stocks pay out. Then we can figure out how much you’ll need to invest to earn $1,000 per month.

Picking the Right Dividend Stocks

It’s important to not just Google “highest-paying dividend stocks” and pick from a list you find on Reddit. This could end up losing you money, because many of the highest-paying dividend stocks are struggling companies whose dividend yield has increased because the stock price has declined by a large margin.

But choosing only blue-chip companies with lower-paying dividends means you’d need a much larger portfolio to earn $1,000 monthly.

The best approach is to find dividend-paying stocks that have consistently paid a dividend for at least 10 years, and invest in companies that have a track record of increasing their dividend each year.

Dividend Aristocrats are companies that have increased their dividend payout each year for at least 25 years, and Dividend Kings have increased their dividend each year for at least 50 years. Picking from these two lists of companies ensures you’re buying a stable, profitable company that prioritizes paying investors and overall financial stability.

Here’s an example portfolio of high-paying dividend stocks from the Dividend Aristocrats list:

If you split your money across this portfolio evenly, you could earn around 5% yield. But remember, as the share price changes, the yield changes and you could lose value while still earning a solid dividend.

How Much To Invest To earn $1,000 a Month from Dividend Stocks

If you want to earn $1,000 per month in dividend stocks, you’ll need to have enough money invested to earn it through dividend payouts. Since dividend payouts are typically every quarter, you’ll need to aim for earning $3,000 per quarter, which equals $1,000 power month.

If you invest in the example portfolio above, you’ll earn around 4.97% annual in dividends. This means you’ll need to invest enough that the 4.97% kicks off $1,000 per month.

Here’s the math: To earn $1,000 per month, you need to earn $12,000 per year. At a yield of 4.97%, you’ll need around $241,448 in your dividend stock portfolio.

Yes, that’s a large portfolio to earn $1,000 per month. But it’s also truly passive income — you don’t have to do anything after investing, and the money will be deposited in your account every quarter.

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This article originally appeared on GOBankingRates.com: Want To Make an Extra $1,000 a Month? This Stock Strategy Makes It Easy