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$500 per month is $6000 per year. $100,000 in high dividend stocks may generate close to that much in dividends per year. So contract for $100 per hour for 1500 hours in the next 18 months. Then make a good investment.

$100,000 is a lot of money. Might not quite be the best way of ensuring passive income for someone that only really needs $500/month. i.e. if they're fine on that amount per month, they're probably not making much more than that.

How does one identify high dividend stocks?

Stocks are typically listed with their yield as one of the statistics. The yield is a measure of what percentage of the current price is handed out each year in dividends.

So a stock priced at 100 doller-pounds and a yield of five percent could be expected to hand a stockholder 5 doller-pounds a year.

Obviously, this is an instantaneous snapshot, based on the price now and the dividend then, trying to give an idea of something that might be expected to happen in the future. So it's by no means any kind of guarantee; it is, however, an easy starting place before looking deeper into the stock to see if you really could expect a good yield going into the future.

S&P does a pretty good job of it.

just stick to an index fund - never hand pick securities!

sure, that's what the big winners do (pun intended)

Just don't forget about taxes...

And then they cut the dividend by 75% (eg Tesco). High dividend stocks dont stay that way.,

Or you can buy an apartment in eastern Europe and rent it for $700-1000 per month.

Real estate was going to be my suggestion, but I don't know anything about the situation in India.

I rent my parents' house in a medium-sized midwest US city; I get around $650/month after property management expenses. After taxes, insurance, maintenance expenses, and the occasional empty period, I'm not getting anywhere near that out of it. But it is still profitable, passive, and the investment needed to increase my income (in other words, buying more property) would not really be excessive.

Well, you better not choose Riga (capital of Latvia) then. According to my back-of the napkin calculations, an 80 000 EUR investment will pay itself back in 10 to 15 years.

I had in mind Tbilisi (capital of Georgia) and maybe Berlin (if you prefer west). But it's not about getting investment back in money - it is more like having a real passive income plus you're the owner of real estate. And you can sell it anytime later (for much better price) if you want.

That's not a safe rate of withdrawal for people who are not gamblers. High dividend stocks are almost by definition risky stocks. More like half that would be sustainable.

"High dividend stocks are almost by definition risky stocks."

Pardon me, but that is more or less the opposite of the traditional received wisdom.

High dividend stocks come in two varieties:

* Low-growth, mature, typically capital-intensive companies, especially those in highly-regulated industries. Think power generation, some real estate investments, and so on. Since stock price appreciation is not in the cards, dividends are the only returns an investor can expect and thus are higher. These are typically the safest stocks, although "safety" is relative; stocks are more risky than most other investments.

* A dividend-paying company whose stock price has been depressed, typically due to specific events: poor management decisions, a bad environment, competition, or what have you. These are typically considered "value" investments; the stock price has been pushed down, usually for good reasons, but also usually, too far. The dividend on these is unlikely to be maintainable---management will usually reduce it as part of doing something to get the company back on its feet or whatever. However, the investment itself is not particularly unsafe, in my personal opinion. See Buffet's "The Superinvestors of Graham-Doddsville" for some other people who feel likewise.

The second group is probably not what the poster wants and I would be uncomfortable focusing solely on the first since those kinds of industries are typically economically linked.

On the other hand, you do have to know what you mean by "high dividend". Thanks to the "dividends are doubly-taxed" lunacy, and double thanks to the "growth is everything" mentality, dividends are very low or non-existent. Anything above, say, 4% (to pull a number out of my flying monkeys) is probably a return of capital, not a return on capital; the money you get as dividends includes a partial payment of your original investment and you cannot expect to get your original investment back when you sell it. In fact, it will disappear entirely over time. And anything over 1.5% to 2% (again with the flying-monkey-numbers) probably represents the value investment situation rather than something sustainable. The 6% mentioned by the grandparent probably is indeed pretty risky.

Also, the bond market is usually considered safer than stocks, with a higher interest "dividend". But I don't really know much about that.

This should not be considered financial advice, I'm some random dude on the internet. Look carefully before you leap, try to learn what you're doing before you try to do it, and try to stick with reputable instruction. There is a crap-ton of bad information out there.

[Did I write something particularly controversial?]

Looked one up in two minutes.

Royal Dutch Shell gives a yield of 4.3%. http://ycharts.com/companies/RDS.B/dividend_yield

In 2010, it's yield was 6.5%.

It isn't inconceivable in 18 months time it'll be back near 6%.

It's all about timing.

I'm sure there are other high dividend stocks which are similarly non-risky, high yielding and produces a non-volatile source of income. 6% is on the high side, but isn't impossible.

You also don't have to look for USD denominated investments. The Commonwealth Bank of Australia (Australia's largest bank), gives a dividend yield of close to 5%.


The share price had risen over 50% over the past 4 years so if you had bought it 4 years ago instead the yield would be much more attractive.

Yields are low currently only because the entire market is currently on the high side of the cycle. When it turns back down, that's when you go in and pick up your 6%, which may be 18 months from now (though could be more, or less).

EDIT: If you're really going to do this I recommend diversifying your investment into 3-4 high dividend stocks in different industries - since dividends do vary as the economic cycle in each industry moves up and down.

I second this recommendation. Also, you only need ~$60k, as long term INR denominated fixed deposits yield ~10%.

And the Indian rupee has no stability against the dollar, so that is meaningless.

A guess, but I think he lives in India and probably cares more about INR return than USD return.

With 8% (very variable) inflation in India he is still confused about what he is getting.

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