How to Have a Monthly Income Off of Stocks
Many stocks pay a dividend to their shareholders. The dividend is the amount of profit generated that was not needed for operations by the company during the reporting period, divided by the total number of outstanding shares. The amount of the dividend will vary based on the profits generated by the company, but large-company dividends tend to be relatively stable, as their business cycles are somewhat predictable and can be planned for.
Other People Are Reading
Instructions
-
-
1
Research dividend-paying stocks. Although some stocks pay dividends monthly, most stocks pay dividends quarterly, so for a monthly income, you will need to only invest in companies with monthly dividends or set up a staggered portfolio of quarterly-dividend-paying stocks.
-
2
Calculate how many shares of which stocks you need to buy to get the monthly income you are looking for. The amount of a dividend can range from a few pennies to hundreds of dollars per share, so you will need to do a lot of calculation and maybe even set up a spreadsheet to model the different stock purchases you are considering.
-
-
3
Buy the stock you researched. Make arrangements to transfer the dividend payments from your broker to your bank. You will have set up a system where you have a monthly income with no other effort on your part.
-
1
Tips & Warnings
Consider the underlying risk in the dividend-paying companies you are investing in. For example, the Alberta Oil Trust might be paying an 11 percent annual dividend and Procter & Gamble just 2 percent, but the risk of the underlying stock is much higher in the case of the Alberta Oil Trust.
The amount of a dividend does change as the economic circumstances of the company change, so it is important to keep an eye on the overall performance of the company, as the dividend will eventually decline if business is not break-even or better.
References
- Photo Credit business charts with buy image by Andrew Brown from Fotolia.com
