How long do I need to hold a stock to get a dividend?
The company announces when the dividend will be paid, the amount and the ex-dividend date. Investors must have bought the stock at least two days before the official date of a dividend payment (the "date of record") in order to receive that payment. The company pays out the dividend to shareholders.
Briefly, in order to be eligible for payment of stock dividends, you must buy the stock (or already own it) at least two days before the date of record and still own the shares at the close of trading one business day before the ex-date.
Dividends are typically paid according to how many shares you have. If you own 100 shares of a company that is trading at $1 a share and paying a dividend of 25%, you would be paid $25.
In a market that generates a 2% annual yield, you would need to invest $600,000 up front in order to reliably generate $12,000 per year (or $1,000 per month) in dividend payments.
In case of interim dividend, the payout to the shareholders has to happen within 30 days from the date of the announcement of the dividend. However, in case of final dividend, the actual payment of dividend only has to be made within 30 days of the Annual General Meeting (AGM).
With a 10% yield and monthly payout schedule, you can get to $500 a month with only $60,000 invested. That is, $6,000 per year paid on a monthly basis. Unfortunately, most stocks don't have yields anywhere near 10%. Many do have high enough yields to get you to $500 a month with diligent savings, but don't pay monthly.
Dividend capture specifically calls for buying a stock just prior to the ex-dividend date in order to receive the dividend, then selling it immediately after the dividend is paid. The purpose of the two trades is simply to receive the dividend, as opposed to investing for the longer term.
$3,000 X 12 months = $36,000 per year. $36,000 / 6% dividend yield = $600,000. On the other hand, if you're more risk-averse and prefer a portfolio yielding 2%, you'd need to invest $1.8 million to reach the $3,000 per month target: $3,000 X 12 months = $36,000 per year.
| Company | Dividend Yield |
|---|---|
| Dynex Capital, Inc. (DX) | 12.36% |
| International Seaways Inc (INSW) | 11.91% |
| Angel Oak Mortgage REIT Inc (AOMR) | 11.83% |
| Pennymac Mortgage Investment Trust (PMT) | 10.93% |
When it comes to investing for dividends, there are three key dates that everyone should memorize. The three dates are the date of declaration, date of record, and date of payment.
How much money do I need to invest to make $500 a month?
Some experts recommend withdrawing 4% each year from your retirement accounts. To generate $500 a month, you might need to build your investments to $150,000. Taking out 4% each year would amount to $6,000, which comes to $500 a month.
To generate $5,000 per month in dividends, you would need a portfolio value of approximately $1 million invested in stocks with an average dividend yield of 5%. For example, Johnson & Johnson stock currently yields 2.7% annually. $1 million invested would generate about $27,000 per year or $2,250 per month.
Stock shares that pay dividends must be held for at least 61 days within a 121-day period that begins 60 days before the ex-dividend date.
In order to receive the upcoming dividend, the holder has to own the shares before the ex-dividend date. The minimum 60-day holding period rule also applies to mutual funds. For preferred stocks, the shares have to be held for over 90 days during a 181-day period that begins 90 days before the ex-dividend date.
The 45-Day Rule requires resident taxpayers to hold shares at risk for at least 45 days (90 days for preference shares, not including the day of acquisition or disposal) in order to be entitled to Franking Credits.
But the truth is you can get a 9.5% yield today--and even more. But even at 9.5%, we're talking about a middle-class income of $4,000 per month on an investment of just a touch over $500K. Below, I'll reveal how to start building a portfolio that could get you an even bigger income stream than this today.
But you'll inevitably need money to make a decent amount from dividends. If you can afford to invest $70,000, then you could earn more than $5,000 in dividends over the course of a year by buying three stocks: LTC Properties (LTC -0.03%), AT&T (T -0.48%), and Enbridge (ENB 0.07%).
For example, if you are able to commit to investing $500 a month in an S&P 500 index fund like the Vanguard 500 Fund (NYSEMKT: VOO), you'll eventually have $1 million, and that includes paying the 0.03% expense ratio in the ETF, meaning you'll pay 3 cents each year for every $100 you have invested in the index fund.
Investing in Stocks without Dividends
This means that, over time, their share prices are likely to appreciate in value. When it comes time for the investor to sell his shares, he may well see a higher rate of return on his investment than he would have achieved from investing in a dividend-paying stock.
The strategy is used by investors to capitalize on dividend payments made by a stock. The goal of this strategy is to buy shares of a company just before it pays its dividend and then sell those shares shortly after receiving the dividend.
Is it better to buy a stock before dividend?
The stock price drops by the amount of the dividend on the ex-dividend date. Remember, the ex-dividend date is the day before the record date. If investors want to receive a stock's dividend, they have to buy shares of stock before the ex-dividend date.
Calculate the Investment Needed: To earn $1,000 per month, or $12,000 per year, at a 3% yield, you'd need to invest a total of about $400,000.
Buy the index or pick individual stocks for passive income
Right now, the average dividend yield on the S&P/TSX 60 Index is around 3.11%. If you just bought the index, you would need to invest $154,340 to earn an average of $400 per month. Fortunately, you can do even better by picking individual stocks.
Investing $100 per month, with an average return rate of 10%, will yield $200,000 after 30 years. Due to compound interest, your investment will yield $535,000 after 40 years. These numbers can grow exponentially with an extra $100. If you make a monthly investment of $200, your 30-year yield will be close to $400,000.
Last but not least (and perhaps most important), The Coca-Cola Company is a dividend juggernaut. Not only has it paid one every quarter for decades now; it has raised its annualized payout every year for the past 62 years.
