How To Earn Dividend Income Like Warren Buffett
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Investors! now let’s learn the power of dividends - unlock the potential for compounding returns, enjoy tax benefits, and hedge against inflation!
My current monthly income through dividends is ~$300/m. And my goal is to reach at least $1000/m before 2024 eoy.
So, remember, this is not a get rich quick scheme - but, instead, a steady cash flow of pure passive income.
1. Free trades == monthly passive income
If you are raised in any family like mine - you’d have heard phrases like:
“don’t invest in stocks - it’s only for the rich ones”
“trading is gambling”
But, we all know by now that it’s not true. (Provided you do it the right way.)
Today investing can be summed up in 3 easy steps:
Open a free account on a trading platform
Add funds (I do recurring deposits)
Buy stocks (I’ve set up auto buy for my dividend stocks!)
Investing is simple as a process but earning through it need, some sort of smartness. First, let’s understand how dividend works.
2. You don’t need fortune to invest
In simple terms, dividends is the money that companies pay you just for holding their stocks.
If you are new to passive-income - it cannot get passive-er than dividend income. 🙊
And the best part is - you can start by investing $1 every day/week/month and still earn dividend income on that.
That is exactly what I do. I have set up $1 automatic stock buy plan for my favorite dividend stocks:
AAPL 1.30%↑ - pays $0.96 annually for every stock you own.
SPY 2.01%↑ - pays $6.5 annually for every stock you own.
O 4.41%↑ - pays $3.06 annually for every stock you own.
MSFT 1.06%↑ - pays $2.7 annually for every stock you own.
Please note, the prices keeps fluctuating.
If you too want to start earning dividends with as less as $1 - here’s the app that I use to invest in dividend stocks on a recurring basis.*
3. Diversification on a budget
Buying dividend stocks is like hitting THREE birds with one stone.
Safe game: Dividend stocks have a reputation for being less volatile compared to non-dividend stocks.
Passive income: You can receive regular dividend payments without having to sell your shares.
Compound returns: If you use the same strategy as mine - you can reinvest your dividend income in the same stock. And see it exponentially grow over the period.
If you are curious to learn my journey of creating The Passive Income Empire - you should check out my story here.
4. Here’s some exciting math for you
These stocks have an historical average dividend yield of +5%. (that is huge, btw).
And, managing risk and reward is the key to massive wealth when it comes to stock investments 👇
Let's say you are a 30-year-old investor who is saving for retirement.
You have $10,000 that you can invest. You decide to invest in a portfolio of dividend stocks.
These stocks have an average dividend yield of 5%. This means that you can expect to receive $500 in dividends each year. All for doing nothing - only trusting in your favorite companies.
Isn't that beautiful? 😍 Be the captain of your own ship. Dividend investment is a process, not a zero-sum game ♣️.
So it’s time to take some action to make things happen and trust the process
Put It In Action...
Step 1: Open an account with a stockbroker.
There are many options - and I would recommend comparing different brokers against your finance goals. But, for beginners - I would recommend one of these*:
These are simplest to start with and navigate through.
Step 2: Add funds to your stockbroker account.
When it comes to investment, I recommend having some discipline. It’s always recommended to pay yourself before you splurge on things. And that’s why I have set up a recurring $500/week deposit distributed over all my investment accounts.
You don’t have to start with $500/week. You can start with $100/week or even $1/week.
Tip: It's best to save up some money to invest with, rather than borrowing money.
Step 3: Select the dividend stocks you want to invest in.
Do your research and look for companies with a good track record of paying dividends. Try to diversify your portfolio by investing in different sectors.
But the stocks mentioned above in this post are some of the best dividend stocks one could never go wrong.
Step 4: Now, it's time to hit $100/m!
Let's say you invested a small amount of money. Now, it's time to achieve your first $100 in dividend income.
Make an earning funnel through dividends:
As you make more money - increase your recurring investments in dividend stocks
Reinvest your dividends to buy more shares of the stocks.
Over time, your dividend payments will grow as the companies you invest in grow their earnings and increase their dividends.
You can also withdraw your dividends to generate income, but holding good stocks is often a wiser move.
Tip: Imagine that your dividend payments are like a snowball rolling downhill. The longer you hold your stocks and reinvest your dividends, the bigger your snowball will become!
So, go out there and start investing in dividend stocks today. Remember - building dividend stock portfolio takes time. But, with a little patience and effort, you'll be hitting $100 in dividend income and thanking your younger self!