This is a tricky question for investors to answer. Especially as it really comes down to not how much you should invest, but how much can you invest?
So today, let’s figure out the answer to both of these questions, and discuss a top dividend stock that could help you achieve $1,000 per month under two scenarios.
Image source: Getty Images
Coulda, shoulda, woulda
Right now is the time when you could end up looking back and wishing you would have invested when shares were this low. No one can time the market, but I can tell you that the market is performing far worse than normal. Thanks to a recession on the way, this is likely to continue for some time.
That being said, it’s also a good time to look at your budget. See how inflation and interest rates have hurt your bottom line, and come up with a new budget. A great idea is to visit your financial advisor, who can help create one with you.
From there, see what you can afford to put aside each month towards investments. It might be a little, it might a lot. The important point is that it’s something. With that in mind, let’s move on to a great investment option.
Northland Power
If you’re looking for both a growth opportunity along with dividends, I would consider Northland Power (TSX:NPI) a solid option. Northland stock has a long history of growth over the last few decades in the area of clean energy. This area is due to rise further as the world shifts over to clean energy solutions.
Northland stock currently has a dividend yield at 3.57%, and delivers this to investors on a monthly basis. Shares are currently down by 18% in the last year, providing a great time to jump in as the company is sure to recover after a recession is over.
But the big question is, how much should you invest?
Whatever is affordable
This depends entirely on you, but here I will provide two options. One is investing right away, and one is waiting and reinvesting dividends until you reach $1,000 per month. Below is the first option, investing enough to create $12,000 annually.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
| NPI | $33.70 | 10,000 | $1.20 | $12,000 | monthly | $337,000 |
As you can see, this is a significant investment for monthly income of $1,000 per month. So let’s see if we can find another option. Let’s say you have $32,000 to invest. Now let’s see how long that would take to reach $1,000 per month while reinvesting dividends.
| Year | Shares Owned | Annual Dividend Per Share | Annual Dividend | After DRIP Value | Year End Shares Owned | Year End Stock Price | New Balance |
|---|---|---|---|---|---|---|---|
| 1 | 950.00 | C$1.20 | C$1,142.94 | C$33,176.82 | 982.52 | C$35.72 | C$35,097.72 |
| 2 | 982.52 | C$1.28 | C$1,252.99 | C$36,371.42 | 1016.16 | C$37.87 | C$38,477.28 |
| 3 | 1016.16 | C$1.35 | C$1,373.64 | C$39,873.62 | 1050.95 | C$40.14 | C$42,182.26 |
| 4 | 1050.95 | C$1.43 | C$1,505.91 | C$43,713.05 | 1086.93 | C$42.55 | C$46,243.99 |
| 5 | 1086.93 | C$1.52 | C$1,650.91 | C$47,922.18 | 1124.14 | C$45.10 | C$50,696.82 |
| 6 | 1124.14 | C$1.61 | C$1,809.88 | C$52,536.61 | 1162.63 | C$47.80 | C$55,578.42 |
| 7 | 1162.63 | C$1.71 | C$1,984.15 | C$57,595.35 | 1202.43 | C$50.67 | C$60,930.06 |
| 8 | 1202.43 | C$1.81 | C$2,175.20 | C$63,141.21 | 1243.60 | C$53.71 | C$66,797.01 |
| 9 | 1243.60 | C$1.92 | C$2,384.65 | C$69,221.07 | 1286.17 | C$56.94 | C$73,228.90 |
| 10 | 1286.17 | C$2.03 | C$2,614.27 | C$75,886.37 | 1330.21 | C$60.35 | C$80,280.10 |
| 11 | 1330.21 | C$2.15 | C$2,866.00 | C$83,193.47 | 1375.75 | C$63.97 | C$88,010.27 |
| 12 | 1375.75 | C$2.28 | C$3,141.97 | C$91,204.16 | 1422.85 | C$67.81 | C$96,484.78 |
| 13 | 1422.85 | C$2.42 | C$3,444.51 | C$99,986.21 | 1471.56 | C$71.88 | C$105,775.30 |
| 14 | 1471.56 | C$2.57 | C$3,776.18 | C$109,613.88 | 1521.94 | C$76.19 | C$115,960.40 |
| 15 | 1521.94 | C$2.72 | C$4,139.79 | C$120,168.60 | 1574.05 | C$80.76 | C$127,126.22 |
| 16 | 1574.05 | C$2.88 | C$4,538.41 | C$131,739.63 | 1627.93 | C$85.61 | C$139,367.20 |
| 17 | 1627.93 | C$3.06 | C$4,975.41 | C$144,424.83 | 1683.67 | C$90.75 | C$152,786.86 |
| 18 | 1683.67 | C$3.24 | C$5,454.49 | C$158,331.50 | 1741.31 | C$96.19 | C$167,498.71 |
| 19 | 1741.31 | C$3.43 | C$5,979.70 | C$173,577.23 | 1800.92 | C$101.96 | C$183,627.15 |
| 20 | 1800.92 | C$3.64 | C$6,555.49 | C$190,290.98 | 1862.58 | C$108.08 | C$201,308.61 |
| 21 | 1862.58 | C$3.86 | C$7,186.72 | C$208,614.09 | 1926.35 | C$114.57 | C$220,692.61 |
| 22 | 1926.35 | C$4.09 | C$7,878.73 | C$228,701.54 | 1992.30 | C$121.44 | C$241,943.09 |
| 23 | 1992.30 | C$4.34 | C$8,637.37 | C$250,723.20 | 2060.51 | C$128.73 | C$265,239.79 |
| 24 | 2060.51 | C$4.60 | C$9,469.06 | C$274,865.33 | 2131.05 | C$136.45 | C$290,779.72 |
| 25 | 2131.05 | C$4.87 | C$10,380.84 | C$301,332.11 | 2204.01 | C$144.64 | C$318,778.89 |
| 26 | 2204.01 | C$5.16 | C$11,380.41 | C$330,347.37 | 2279.46 | C$153.31 | C$349,474.10 |
After the new shares are considered, you are then left with over $12,000 in dividends each year. So it would take 26 years to reach $1,000 per month, but far less of an investment, and far more returns.
