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Want to Collect $500 in Dividends Every Month? Invest $90,000 in These 3 Stocks

Motley Fool - Thu Sep 14, 2023

Inflation is giving investors more of an incentive to find ways to increase their income. If you have a decent nest egg saved up, you can use it to invest in dividend stocks to improve your financial position. It could be a better alternative than dipping into your savings.

And if quarterly cash flow isn't enough, you can invest in three stocks with different payment schedules, which will result in cash flowing into your portfolio each month of the year. Three stocks that pay high yields and that could help accomplish this include Viatris(NASDAQ: VTRS), Verizon Communications (NYSE: VZ), and Altria Group (NYSE: MO). By investing approximately $90,000 into these stocks, you can generate $500 in monthly dividends.

1. Viatris

Generic and branded drugmaker Viatris has the potential to make for a stable long-term investment. It emerged in 2020 from a spinoff of Pfizer's Upjohn segment, which then merged with Mylan. The company is in the process of getting leaner and divesting certain areas of its operations so that it can focus more on growth opportunities while also reducing its debt load.

The stock's revenue for the period ending June 30, excluding divestitures and the impact of foreign exchange, increased only 1%, which may underwhelm growth investors. But for dividend investors, there's some good value here, as the business projects to generate $2.5 billion in free cash flow (at the midpoint) for 2023. That provides ample safety given that Viatris' dividend costs less than $600 million over the course of a full year. Trading at less than seven times earnings, Viatris is also an incredibly cheap buy.

The stock yields 4.8%, which is three times the S&P 500 average of 1.6%. Investing approximately $41,670 into the healthcare stock would be enough to generate a $500 dividend payment every quarter. Viatris makes payments every March, June, September, and December.

2. Verizon Communications

Telecom giant Verizon pays an even higher yield at 7.8%. The yield is high as investors have been dumping the stock amid a rise in interest rates and fears of a slowdown in the economy, which can lead to less travel and a decline in roaming-related fees. Exacerbating those concerns are the potential costs that Verizon may need to pay to clean up lead-covered cables.

It's a concerning issue, but it's not one that should derail the stock or lead to a sell-off. Any liabilities Verizon may need to pay are still unknown, and should it have to make payments, they likely could be spread out over years. Investors look to be overreacting, and may be forgetting that with a payout ratio of around 50%, Verizon does have a buffer should its earnings deteriorate. The company certainly doesn't appear worried, as Verizon recently raised its dividend for a 17th consecutive year.

The business remains sound, and with its high yield, investors would need to buy $25,600 in Verizon's stock to collect a $500 dividend every quarter. Verizon typically issues dividends every February, May, August, and November.

3. Altria

Tobacco company Altria has the highest yield on this list at right around 8.8%. Tobacco isn't exactly full of growth opportunities these days but Altria has been making efforts to diversify and give consumers options for smoke-free products, including heated tobacco and e-vapor. Smokable products do, however, remain the company's bread and butter, accounting for just under 90% of its revenue.

Although overall company sales of $6.5 billion were down 0.5% year over year for the period ending June 30, Altria's adjusted diluted earnings per share of $1.31 was up by 4%. Investors haven't been bullish on Altria's stock over the years (it's down 27% in five years), but the company does have a relatively strong recurring customer base, and at the same time it's diversifying its business as it recognizes the need to offer products that may be less harmful to consumers.

Its free cash flow totaled just over $8 billion last year, which was strong enough to support dividend payments of $6.6 billion. The stock remains a popular one for income-oriented investors, as last month Altria announced a 4.3% rate hike to its payouts -- the 58th time it has increased its dividend in 54 years. Investing approximately $22,730 in the stock would be enough to collect a $500 every time the company makes a dividend payment, which is every January, April, July, and October.

Combined with the other investments on this list, the total you would need to invest to secure $500 in monthly dividends would be approximately $90,000.

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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Pfizer. The Motley Fool recommends Verizon Communications and Viatris. The Motley Fool has a disclosure policy.

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