We all want to earn a nice, regular income from investments. Dividend-paying stocks can be a really interesting way to do just that! Northland Power (TSX: NPI) is one company that pays dividends every month. That monthly income can be pretty handy for regular cash flow. So, if your goal is to make $500 each month from NPI in dividends, let’s dive into what that would involve.
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What it would take
As of writing, Northland Power’s stock was selling for $18.34 per share. The company sends out a dividend of $0.10 per share every month. If you add that up over a year, that’s $1.20 in dividends per share annually. Based on the stock price, this works out to a dividend yield of about 6.48%. That means for every $100 you invest, you’d get about $6.48 back in dividends each year, assuming the dividend stays the same.
Now, let’s figure out how many shares you’d need to own to bring in $500 each month. This would mean reaching a goal of $6,000 annually. Here’s how it shakes out.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
| NPI | $18.34 | 5,000 | $1.20 | $6,000 | monthly | $91,700 |
Therefore, you’d need to invest around $91,700 to acquire 5,000 shares of Northland Power at its current stock price. That’s a pretty substantial investment to aim for that level of monthly income from a single stock.
Is it worth it?
Northland Power has a history of paying dividends consistently each month, which can be appealing for income investors. However, there’s something important to note. The company’s dividend-payout ratio has been over 100%. This means it has been paying out more in dividends than it has been earning in profit. A payout ratio that’s higher than 100% isn’t always sustainable in the long run. It could mean the company might have to reduce its dividend payments in the future if its earnings don’t improve. Investors should keep a close eye on this.
Furthermore, putting a large chunk of your investment money into a single stock always comes with risks. If the dividend stock doesn’t perform well or if the sector it operates in faces challenges, the stock price could go down, and the dividend payments might be affected. A smart way to manage this risk is to diversify your investment portfolio. Instead of putting all your money into one dividend stock, you could spread it across different companies in various industries. This way, if one investment doesn’t do as well, the others might help balance things out.
Bottom line
To potentially earn $500 in dividends each month from Northland Power at the current rate, you would need to invest around $91,700 to buy about 5,000 shares. While the monthly dividend payments and the dividend yield might look attractive, it’s really important to consider the company’s high payout ratio and the risks of putting so much money into a single stock.
Make sure this investment strategy lines up with your overall financial goals and how much risk you’re comfortable taking. It’s always a good idea to do your own thorough research and maybe chat with a financial advisor to get personalized advice before making such a significant investment. They can help you figure out if this is the right move for you and your financial future!
