How much would it take to earn $1,000 a month in dividends with just four stocks?

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Many investors dream of passive income. Not relying on just one paycheck can free you up to follow your dreams, get you closer to retirement, or provide a solid safety cushion for potential times of trouble.

Dividend investing can be a way to build a nest egg and let your money work for you. Reaching $1,000 in monthly income means you should generate $12,000 in dividends annually. To do this, you need to have stocks that meet a few criteria. They must provide a consistent and stable dividend payout. Some high-yielding stocks can be tempting, but examining dividend history can reveal dividend cuts or breaks. The health of the company, the sector it’s in and the strength of its balance sheet help determine which stocks can go the distance.

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Can you generate $1,000 in monthly income using just four dividend-paying stocks? This portfolio would target yield and reliability, focusing on industry diversification. Assuming the average dividend yield for four stocks is about 4%, the total investment required would be about $300,000 to generate $12,000 annually at a 4% yield.

Choosing the right actions

A mix of stocks from different sectors can balance risk while aiming for high and stable dividend yields. These may include:

1. Altria Group, Inc. (NYSE:MO)

• Section: Consumer staples (tobacco)

• Dividend yield: 7.6%

• Why: Altria has a long history of paying high dividends despite operating in a declining industry. Its high yield helps you meet your income goals faster.

• Watch: Revenue for the company’s smoking products fell 5.6% in the second quarter of 2024. The company is transitioning to more smokeless offerings. Investors will want to track the company’s progress in this area. “We are confident in the long-term outlook for our smoke-free portfolio and have a significant opportunity to responsibly lead the transition of adult smokers to a smoke-free future,” said Billy Gifford, CEO of Altria, during the second -quarterly earnings call.

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2. AT&T Inc. (NYSE:T)

• Section: Telecommunications

• Dividend yield: 5.29%

• Why: Although AT&T has faced challenges, it maintains a strong dividend. It operates in a cash flow heavy industry that supports stable dividends over time.

• Watch: As one analyst put it, AT&T needs to manage “growth and profitability.” This means expanding the mobility business and preparing for the broadband future. “This story is about customer and profitability growth as our consumer cable business delivered EBITDA growth of more than 7% during the second quarter. This was driven by approximately 18% growth in fiber revenue and improved leverage as we move from legacy to advanced broadband networks. infrastructure,” AT&T CEO John Stankey said on the second quarter earnings call.

3. Realty Income Corporation (NYSE:O)

• Section: Real Estate (REIT)

• Dividend yield: 5.06%

• Why: Realty Income is a REIT known for paying monthly dividends, providing stability and regular income. It’s a strong choice for steady cash flow.

• Watch: Investors will want to watch how Real Estate Income handles debt. In August, it announced a public offering of $500 million of 5.375% senior unsecured notes due 2054, with an effective yield of 5.486%. The company also signaled that it may be faster to sell some properties. “As we continue to calibrate and refine our predictive analytics tools, advancing our investment pieces for each property in our portfolio, we may be more active on dispositions than in the past,” said the CEO Realty Income’s Sumit Roy on the second quarter earnings call. .

4. Johnson & Johnson (NYSE:JNJ)

• Section: Health

• Dividend yield: 3.02%

• Why: Although it has a lower yield than the others, J&J is very stable and has a strong record of dividend growth, making it a good defensive stock.

• Watch: Johnson & Johnson deepens exposure to tech environment through strategic acquisitions. Last month, it announced it would pay $1.7 billion for V-Wave, a medical device company focused on cardiovascular issues. “We continue to grow our pipeline, launch new commercial products and integrate strategic acquisitions that further expand and differentiate our portfolio,” said Joseph Wolk, the company’s chief financial officer, on its most recent earnings call.

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Allocation Adjustment

Given the different yields, we’d allocate more capital to lower-yielding but more stable stocks like Johnson & Johnson and Realty Income. Higher-yielding stocks like Altria and AT&T may require less capital. The combined return on these four stocks is 5.2%, which means it could take less than $300,000 to reach that $12,000 annual goal.

These are just assumptions, and investors will want to remember that high-yield stocks like Altria and AT&T carry more risk, while J&J offers stability but a lower yield. Each share’s dividend payout ratio and financial health must be monitored to ensure sustainable dividends. Although this portfolio is diversified across sectors, it is still important to review it regularly. Diversifying into other stocks, bonds and real estate can provide additional income and safety against broader downturns.

Another way to build wealth

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