The Math Behind Making $100,000 Each Year Through Dividend Investing

A thorough analysis of dividend investing to reach our number

Marc Guberti

--

How much money would it take to make $100,000 each year through dividend investing?

Dividend stocks are attractive investments because most of them pay you each quarter just for holding onto them.

Some companies pay monthly, bi-annual, or annual dividends, but most stocks pay a quarterly dividend.

Some companies like Apple pay a measly dividend (0.71% yield as of writing). These are growth companies which will raise their dividends over time and are still prime for stock price appreciation.

Then there are stocks like AT&T that offer juicy dividends but dimming growth prospects. Their 7.48% dividend yield is higher than most stocks, but the dividend doesn’t offset the fact that AT&T stock’s returns have consistently underperformed the market.

As a dividend investor, it’s important to buy solid companies primed to appreciate and increase their dividend payments over time. Just because a dividend stock provides a high yield doesn’t mean it’s an attractive investment.

To figure out how we’ll reach $100,000 each year through dividend, we need to know two key numbers:

#1: The current dividend payments

#2: How much those payments grow each year (dividend growth rate)

While the dividend yield will change each day in relation to the stock’s price, the dividend payments will stay the same unless a company decides to cut or slash their dividend.

For this analysis, we’ll use Texas Instruments (TXN), a stock with growth opportunities and a growing dividend.

TXN is priced at $149.96 as of writing and offers a $1.02/share dividend per quarter. They increased dividend payments by 13.3% this year and have raised it by 15% or more over the past few years.

The higher the dividend yield and the dividend growth rate, the sooner you will make $100,000 each year through dividend investing.

The only significant hurdles that can get in the way are a company slowing down its growth rate or…

--

--

Marc Guberti

Personal finance freelance writer -- I write articles for clients on finance, digital marketing, and other topics