How Much Do You Need to Invest to Get $400 a Month in Dividends?

Creating passive income this high doesn’t come cheap, but you can still save about $30,000 investing today rather than at 52-week highs.

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If you’re looking to create passive income from investing in a solid dividend stock, there are quite a few things to consider. Of course, the first point of contention is how much can you and should you invest in the first place?

With that in mind, most of your portfolio should be structured with the help of your financial advisor. There should then be a bit left over each month for you to put towards investments, such as a solid dividend stock. And if you have a fair amount to invest from years of savings, then now is a great time.

Consider the market

The first consideration you need to make is looking at the market when deciding on the dividend stock you’re going to buy. This might sound obvious, but you also may misunderstand me. Right now is a bear market that’s likely headed towards a recession. But rather than thinking it’s a poor time to buy, it’s a great time if you find the right dividend stock.

Of course, you need to consider what could do well or at least survive well enough during a recession if you need the money. If you don’t, what company could create long-term gains by purchasing them today at lower prices?

For me, that means going essential. Whether it’s basic materials, utilities, healthcare, or other essential services, you want to look for companies that will be necessary no matter what happens. That includes during a recession. But here’s a top choice to consider.

Consider this dividend stock

If you want an essential company that’s going to provide you with a solid dividend, then I would look to NorthWest Healthcare Properties (TSX:NWH.UN) as a great long-term option. The company has stable cash flow coming in from the leasing of healthcare properties around the world. It has a 14-year average lease agreement as well as a 97% occupancy rate.

NorthWest stock is also a steal. Shares are down about 40% at the time of writing. You can therefore get a dividend yield at 9.56% — all while it’s trading at 7.38 times earnings!

Now, how much would you need to invest in this dividend stock to create that $400 per month?

Consider the cost

The reason I’m going with NorthWest here is because it’s so darn cheap. That’s in terms of valuation but also cost in general. You can pick it up as of writing at just $8.56 per share. So, let’s now compare what you would pay now compared to what you would have paid at 52-week highs for $400 per month.

COMPANYRECENT PRICENUMBER OF SHARESDIVIDEND (ANNUAL)TOTAL PAYOUT (ANNUAL)FREQUENCYTOTAL INVESTMENT
NWH.UN — Now$8.566,000$0.80$4,800Monthly$51,360
NWH.UN — Highs$146,000$0.80$4,800Monthly$84,000

That’s right; you save over $30,000 if you want to create $400 per month in passive income. Furthermore, this could be cash set aside in your TFSA, meaning it would be all tax free, with plenty left over for other investments.

Again, just make sure most of your investments are put in low-risk, conservative choices that are done alongside the advice of your financial advisor. If so, you’ll be set up for a long life of solid income.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has positions in NorthWest Healthcare Properties Real Estate Investment Trust. The Motley Fool recommends NorthWest Healthcare Properties Real Estate Investment Trust. The Motley Fool has a disclosure policy.

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