Generate Monthly Income with Dividend Stocks

Who wouldn’t want some additional monthly income? If you have a stock portfolio, it is possible to obtain monthly income that can be used to supplement existing income or provide you with income for your living expenses forming a foundation for financial freedom. Retirees might benefit from using this technique as well.

Dividend Stocks

I won’t go into the stock selection process, but it is important to select stocks that have good management and a stable history of dividend payment. There are many resources on the web that can help you in this process. What I want to show you is how you can take that information and create a monthly income using those stocks that you have found.

Note: I am not necessarily recommending the stocks below. I am just showing you how to go about the process of creating monthly cash flow from dividends.

There are some stocks which pay dividends on a monthly basis.  If they seem appropriate to use in your portfolio, great.  Mission accomplished.  However, most stocks pay dividends on a quarterly basis.  So, how can we create monthly income using these stocks?  Simply own stocks that pay out their dividends during different months.

How do you get this information?  If you want to pay, you could sign up for an internet based service and spend several hundred dollars per year.  But let’s keep it simple and look at the stocks you already have in your portfolio.  Let’s say that you are nearing retirement and decide that you should devote roughly half your $500,000 investment portfolio to stocks while the other half will go to fixed income instruments such as bonds and CDs.

When you look at the stocks you own, you find that you own:

Walmart 1,000 shares @ 51.07/share

Coca-Cola 1,000 shares @ 49.44/share

Microsoft 2,000 shares @ 22.14/share

JP Morgan Chase 1,500 shares @ 34.55/share

Verizon 1,500 shares @ 29.25/share

When we look at the Yahoo! Finance site, we find that WMT pays dividends in March, May, August, and December.  So let’s create a table and fill in the data for the other stocks also:

WMT -- March, May, August, December

KO – March, June, September, November

MSFT – February, May, August, November

JPM – January, April, July, October

Verizon – January, April, July, October

So, you can see that every month is represented in the table.  Now you can calculate the anticipated income that you would receive for that particular month, knowing the dividend payment of the individual stock.

For example, January payments would come from JPM (1500 shares * 0.05/share) of $75 and VZ (1500 shares * 0.46/share) of $690 for a total of $765.  In February, you would only receive the MSFT dividend of (2000 shares * 0.13/share) $260.  Only you can decide if that will be enough when added to your other sources of income.

You may have to make some changes in your portfolio.  Get rid of JPM and get Exxon Mobil (XOM) instead which pays out in February, May, August, and November.  Trade out KO for Pepsi.  Get creative.  With some research, you can tailor the portfolio to your income needs.  Look for stocks with low debt, stable cash flow, strong management, and a solid history of dividend payments, and you can receive a nice monthly income solely from dividends.