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The EASIEST Way To Make $1000 A Month On Passive Mode

The first thing that comes to mind when you think of the stock market is this complicated world of the stock market.

By AndeutPublished about a year ago 7 min read

With so many perplexing charts, it’s easy to become disoriented. But everyone knows that you can buy stocks and sell them whenever they rise in value, but there is another method that professional investors use to make a fortune.

Warren Buffett received 3.8 billion dollars in cash from his five major investments in 2018. Don’t get me wrong: he didn’t sell his stock to make that much money.

Instead, these five businesses made a lot of money last year.

Because Warren Buffett is a shareholder in these companies, they were required to share their profits with Buffett.

This is known as dividends.

Simply put, there are two types of companies in the stock market: those that have already matured and have profitable and sustainable business models, so whenever they make a profit, they don’t know what to do with it, so they send it to their shareholders; and those that are still trying to turn a profit, such as Tesla.

They may report a profit, but the company requires that money to continue to grow, so here is a question we will attempt to answer in this video: how many stocks do you need to buy or how much do you need to invest in the stock market to receive a thousand dollars from your investments every month without selling your stocks?

But first, we need to understand a few key concepts.

How do dividends work?

What are the best dividend stocks to invest in?

And how can you avoid falling into the dividend trap, which could result in the loss of your entire investment?

1. Dividends Have Been a Source of Real Passive Income Since

Investing has evolved in many ways. Previously, investors’ primary concern was to invest in companies that would make a profit and share that profit with them because, as shareholders, they were entitled to the company’s profits.

However, entrepreneurs such as Jeff Bezos intervened and completely altered the game. The goal was no longer to maximize profits but to grow the company, even if it meant not paying any dividends to shareholders.

A company that only burns cash and is not profitable appears to be a bad business, but the strategy is to continue operating at a loss until you dominate the entire industry, at which point you will generate profit because you will be the only player in the market.

And that’s exactly what Amazon has done for the past 25 years. Despite its 1.6 trillion-dollar valuation, it has never paid a single penny in dividends to its shareholders. In fact, it avoided paying taxes for two decades because it was operating at a loss. It generated 11.5 billion dollars in net income in 2019, while its competitor Walmart generated 15.2 billion dollars and paid 2.16 dollars in dividends per share, but at the end of the day, Walmart was valued at one-third of an Amazon. While Amazon may appear to be a more promising stock in the future, Walmart appears to be a better option for passive income. Such examples abound in the stock market.

There are only a few tech companies that pay dividends. The rest, particularly the large ones, would rather reinvest their earnings than pay you.

2. High Dividends — The Ideal Scam for Attracting Investors

While stocks that pay high dividends are appealing, they aren’t always the best option. In fact, dividends are sometimes used to deceive and defraud investors.

The company could be on the verge of going bankrupt, or it could be barely surviving. Its stock is declining year after year, so one way to make it more appealing to investors is to pay out large dividends.

Consider the Universal Corporation or UVV.

If you look at its dividend rate, you’ll notice that it has a dividend yield of 7.16 percent. That is an unfathomable high. You’re unlikely to find anything like that on the market. Even Apple, the world’s largest corporation, pays around 2% in dividends. However, I would not buy this stock and would not advise anyone else to do so. The stock price was around $50 five years ago, and you’d think it would have risen slightly since then, but it didn’t; the price fell to $43, and the company does appear to have a future, so it pays high dividends to keep its stock appealing to investors because who knows where the stock price will be in a few years? Compare that to Apple, which pays only 2% in dividends but has seen its stock price rise by 337 percent over the same time period. Cashflow is great, but losing your principle is disastrous. And such stocks abound in the stock market.

Don’t buy a stock just because it has the highest dividend yield.

3. The Best Dividend Stocks of All Time

You’re probably wondering if there are any good companies that are both growing and paying high enough dividends.

There are, in fact, a lot of them!

Take Coca-Cola, for example; the company has been around since 1886 and has been paying dividends since before you were born; it has a decent dividend rate of 3.2 percent. Of course, the stock price hasn’t been growing as quickly as some of the tech companies’ because many people believe there isn’t much room for Coca-Cola to grow, but it’s not going to fall the next day.

Another example is Home Depot.

They have consistently paid a dividend yield of 2.5 percent. In the last five years, the stock price has more than doubled.

Johnson & Johnson has been in business since 1886 and is known as the “King of Dividends.” It’s a well-known brand in the pharmaceutical industry.

It is also crucial in the development of a vaccine for the current pandemic. Its stock price may skyrocket once the vaccine is ready. Companies that do not typically pay dividends are those in the technology sector, with the reasoning being that the company would be far better off reinvesting that money and growing faster. Companies like Google, Facebook, and Tesla do not pay dividends, which is why investors prefer Apple. It is a technology company that excels in both hardware and software. It has an in-built ecosystem that provides consistent cash flow. Its stock price rises at the same rate as other technology companies, but it also pays a dividend yield of around 2%.

So, let us attempt to answer the question.

4. How much money do you need to invest to make $1,000 per month?

Because dividend yields differ from one stock to the next, and we don’t want to invest in companies that don’t appear to perform well in the long run.

We will consider companies that not only pay high dividends but also grow in value over time, such as Apple, Coca-Cola, Johnson & Johnson, Home Depot, and others.

It is difficult to determine an exact dividend yield because stock prices and dividend yields fluctuate throughout the year. It also depends on the portfolio you build, but let’s assume you’ll get 2.5 percent per year.

To receive a thousand dollars in passive income, you must invest approximately 500 thousand dollars, which will provide 12500 dollars per year or slightly more than one thousand dollars per month.

Assume you want to make enough money from dividends to retire completely.

In that case, you’d need to invest at least $2 million to earn $50,000 per year. I guess you’re not impressed because investing half a million dollars in real estate, for example, would provide you with significantly more passive income than 12500. As a result, investors are more concerned with the stock price than with dividends. Amazon may not have paid any dividends, but its stock has increased by 522 percent in the last five years.

Amazon investors have made far more money than any dividend investor could have imagined. Does this imply that investing in dividend stocks is a waste of time?

Not at all!

If you have a large enough portfolio that is invested in a diverse range of stocks, including dividend stocks in your portfolio is a wise decision. However, you must consider that these stocks are also increasing in value, so if you use the dividends to buy more stock in the company, you will end up with a pretty good investment. The stock price of Home Depot increased by 26 percent last year, and it paid around 2.5 percent in dividends, making it an appealing investment. On the other hand, if you are just starting out with a small amount of money, such as a few thousand dollars, you cannot afford to buy a property to rent out, so dividend stocks may be an option to consider for some.

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