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‘Easiest Way To Replace Your Income’: Finance YouTuber Says This Is How Much You Need To Live On Dividends — Forever. He even shows off his portfolio that generates $10,000 per month
It is the dream of many people to earn enough passive income to live comfortably without having to work, and one way to do this could be through investments that pay dividends.
Finance influencer Graham Stephan took a deep dive into dividend investing in a recent video on his YouTube channel. His intent was to show whether dividend payments from publicly traded stocks are overvalued or, as he puts it, “the easiest way to replace your income.”
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The video is another contribution to the lively discussion among those who want to replace wages and salaries with passive investment income to achieve financial independence and even early retirement. This is also known as the FIRE (financial independence, early retirement) movement.
Stephan built his reputation as a savvy investor on YouTube by focusing on cash flow rather than capital appreciation. He often discusses the benefits of buying property or stock that appears to be below fair value and holding onto it for long-term cash flow.
The pros and cons of dividend investing
Stephan believes dividends are much more stable than stock prices and just as lucrative. This is true when you consider that the Dividend Aristocrats — a widely distributed list of 67 S&P 500 stocks that have consistently raised dividends for more than 25 years — typically pay out between 0.3% and 5.3% on investments, according to Stephan. with most between 2% to 3%.
Stephan calls Dividend Aristocrats the “holy grail of passive income.”
Crucially, companies have no obligation to pay dividends and can reduce payouts without notice in difficult times. For example, VF Corp. the dividend payment and was officially removed from the Dividend Aristocrats list in March.
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But according to Stephan’s analysis, investors can still rely on dividend stocks to fund their post-retirement lifestyles.
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Stephan’s dividend portfolio of $10,000 per month
Stephan claims his dividend portfolio generates $9,400 per month in passive income. The portfolio includes five major holdings:
Schwab US Broad Market ETF ($5,000 per month)
Schwab International Equity ETF ($2,000 per month)
Individual dividend stocks ($2,400 to $3,000 per month)
In total, Stephan claims his portfolio generates about $112,000 a year in passive income. Based on historical data that tracks the underlying companies’ record dividend rises and falls, Stephan says his portfolio’s income is more or less stable “regardless of what happens to the stock market.”
How much do you need?
Stephan believes the first step to figuring out how much money you need to be financially free is to calculate how much your lifestyle costs.
“The person who lives in an apartment building in New York City lives a very different lifestyle than someone who lives off the grid in rural Montana,” as he puts it in the video.
He does a quick calculation and finds that a portfolio of dividend aristocrats with an average return of 3% can return about $50,000 a year with an upfront investment of $1,670,000.
Simply put, you need to invest about $1.7 million to potentially earn $50,000 in passive income through dividends, which would be enough for many Americans to retire early and live the rest of their days.
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This article provides information only and should not be taken as advice. It comes without any kind of warranty.
