How to Create a Dividend Stocks Ladder and Live off Your Dividends

You cannot put a price on financial security and that’s why dividend stocks need to be a part of your portfolio. Dividends pay the bills even when you can’t. In this video, I’ll show you why you should buy dividend stocks and reveal three types of passive income dividend investments. I’ll then share a five dividend stock portfolio and how to create a ladder so you cash flow every month and can live off your dividends.

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Why are dividends so important? Maybe it’s just personal experience but dividend investing may be the only thing that saves you from financial ruin. You can count on dividends and can live off them when your other income dries up. Building a dividend portfolio to pay the bills doesn’t happen overnight though so start now and it will be there when you need it.

I like to focus on three types of passive income dividend stocks when creating a portfolio. First are special structure stocks like REITs and BDCs. These companies get tax breaks for passing the majority of earnings on to investors. The result is you get a high dividend yield but these stocks don’t always grow the share price as quickly as others. For that, I also buy dividend stocks in the 4% to 6% yield range and look for companies with a history of higher returns as well as cash flow. Finally, for stocks I like that don’t pay much of a dividend, I use the covered call strategy to boost my cash payout.

Having these different types of dividend stocks not only gives you the opportunity for higher yield and returns but also protects you from trouble in any one particular part of the market. It’s a diversified dividend portfolio that will keep putting cash in your account.

For the five dividend stock examples, I’ve found stocks with an average 24% annual return over the last five years and a 6% dividend yield. That yield is more than three-times the market average and on stocks with a history of growing the payout. I’ve also picked them for that dividend ladder strategy. Combining your stocks this way is about looking for investments that pay dividends in different months so you can depend on the cash flow and live off dividends. You might not get a dividend check every month but it will be regular enough that you’ll be able to cover your bills.

Living off your dividends doesn’t happen overnight but you can build a dividend portfolio in less than 10 or 15 years that will produce $3,000 a month in income. Start slow if needed with a few hundred invested each month and always reinvest your dividends. You’ll start making dividends off your returns for that compounding effect that will grow your portfolio. Within a decade or so, you’ll have dividend stocks worth hundreds of thousands and enough dividends to live on each month.

0:00 Dividend Stocks for Beginners
0:32 Why Buy Dividend Stocks?
3:55 Three Types of Passive Income Dividend Investments
6:12 Five Dividend Stocks to Buy
11:35 How to Create a Dividend Ladder
14:02 How to Live Off Dividends

#dividends #dividendstocks #stocks

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Joseph Hogue, CFA spent nearly a decade as an investment analyst for institutional firms and banks. He now helps people understand their financial lives through debt payoff strategies, investing and ways to save more money. He has appeared on Bloomberg and on sites like CNBC and Morningstar. He holds the Chartered Financial Analyst (CFA) designation and is a veteran of the Marine Corps.