When you work at your job, you're trading your time and energy for money. The magic of investing in dividend stocks reverses this concept. When your investments pay you, you can keep more time and energy for yourself, not your boss.
Many stocks pay a quarterly dividend, but Realty Income (O 0.90%) will pay you every month you're a shareholder. The company is so proud of its dividend that it refers to itself as The Monthly Dividend Company.
So, how much would you need to invest in Realty Income to receive $100 each month? Here is how to use the stock to build a dependable dividend machine that helps you work less and enjoy life more.
Why you can trust your hard-earned money with The Monthly Dividend Company
Real estate is one of the oldest and most proven ways to invest. Unfortunately, beyond buying your own house, few investors have the money or knowledge to go beyond that. A commercial property can easily cost millions of dollars.
Image source: Getty Images.
That's why real estate investment trusts (REITs) are an excellent option for most individual investors. These publicly traded companies acquire and lease real estate and distribute most of their income to shareholders. REITs typically make excellent dividend stocks.
Realty Income is one of the best REITs out there. Its business model is a recipe for stability:
- A diverse portfolio of 15,627 properties across the United States and seven other countries.
- Focus on tenants in consumer-facing, recession-proof businesses that reliably pay rent.
- Stable revenue streams with net leases that put expenses like insurance, taxes, and maintenance on tenants.
- Conservative management that maintains an investment-grade balance sheet.
The company has paid and raised its dividend for 32 consecutive years, including during the Great Recession from 2007 to 2009 and the COVID-19 pandemic -- arguably the two most challenging events for real estate in decades. Its dividend payout ratio is 75% of its 2025 funds from operations (FFO) guidance. It's a comfortable cushion for a business that strives for stable financial performance.
Here are how many shares you need to generate $100 in monthly dividends
So, if you did want to receive $100 in dividends starting next month, how much would you invest today?
With Realty Income's outsized 5.8% dividend yield, investors need less money than they would for most other stocks.
Realty Income's most recently announced dividend was for $0.2685 per share. Therefore, you would need 373 shares to receive $100, an investment of roughly $20,701 at the current share price.
That's a lot of cash, but don't worry. You can start with any amount and reinvest the dividends until you amass enough shares. Reinvestment means the dividends will buy more shares, which pay more dividends. You will accumulate shares faster over time.
Don't stop reading; here are some crucial tips
Like all things in life, there is some fine print.
As wonderful a business and dividend stock as Realty Income is, investors shouldn't put all their eggs in one basket. Diversifying your portfolio across various companies, industries, and assets is always a good idea, so you're not in trouble if something unexpectedly goes wrong.
If you invest in Realty Income, remember that REITs pay nonqualified dividends. It's not necessarily a big deal; it simply means the IRS will tax them as ordinary income at your applicable tax bracket. Whereas dividends from most companies eventually qualify for a lower tax rate after you've held them long enough, REITs don't pay a federal corporate income tax, so Uncle Sam treats dividends from them differently.
You can consider owning Realty Income or other REITs in a tax-advantaged account. And, of course, you can consult a certified tax professional to help steer you in the right direction for your investment strategy and financial situation.
A dependable dividend stock like Realty Income is a great cornerstone for a portfolio that investors can build on until they reach their financial goals.
