A Detailed Guide on How to Passively Make 100€ per month in Dividends by Investing in the Stock Market
Who doesn’t like a bit of passive income on the side. You are able to make some money without having to consistently put time and effort into it. Investing in dividend paying Stocks is one such way you can guarantee yourself a consistent income on the side. Here is how you can make 100€ every month by investing in stocks that pay dividends!
DISCLAIMER: I am not a financial advisor and you should do your own research before making any financial decision! In this article, I am sharing my opinions based on my own experiences and investment strategies.
What are dividends?
Dividends are distributions of profits paid by a company to its shareholders. In summary, dividend is the reward that a company gives you for investing your money with them. Companies will regularly pay dividends to its investors because it wishes to reward investors for providing them capital. Companies also aim to build trust amongst investors and paying dividends regularly is one way of doing that.
Now, companies are not legally bound to pay you dividends. It is upto their will. In fact, dividends may not even be from profits. If the company wants to, it can pay dividends with running losses too. This is why you need to do proper research before investing in a stock. In this article, we will take a look at a few dividend paying stocks and analyze their performance.
How to make 100€ per month in Dividends ?
When I came to Germany, I started off investing in really small amounts. I did not have any experience or insight into investing, and the whole concept seemed so new to me. But today, I have a portfolio of over 120k€ in Scalable Capital Broker. Take a look at my portfolio here!
It is so convenient for me to manage my portfolio on Scalable Capital. With the PRIME BROKER plan I am able to invest in several stocks and ETFs without any transaction cost. In fact you can open your depot with Scalable Capital today and start investing without any cost whatsoever. You can read our step by step guide on how to open your depot here.
I have invested in a few companies that pay me dividends every month. And this is what I am going to share with you today. Consider it a tip from my side, here are a few stocks that you should consider investing in to earn passive income through dividends!
1. SLG – SL GREEN REALTY CORP
SL Green Realty Corp., an S&P 500 company, is a fully integrated real estate investment trust (REIT) that is focused primarily on acquiring, managing and maximizing value of Manhattan commercial properties. Launched in the year 1997, the share price of SLG stands at 62.37€. SLG pays out an annual dividend of 4.07 € per share. (NOTE: Dividends are paid out monthly which is why I am invested in this company)
SLG have consistently been generating revenues in Billions as of 2020. Here is their revenue chart:
Even though the revenue is declining right now, the company has more ambitious projects planned for themselves in the future and only have a dividend payout ratio of 55%, which means they are still keeping 45% of their profits which they are investing back into the business. This is good and when others could be selling the stock right now, a company which has been standing since 1997 and has massive properties in New York is unlikely to whither with the portfolio of office spaces they own.
The ongoing phenomenon of work from home has definitely impacted the estimated earnings of the company, but like we all know, things can change very quickly and I still fail to believe that people would not enjoy going back to their offices, sit down with their colleagues face to face and work together.
As the above chart clearly represents, the annual dividend paid out by SLG has been consistently increasing. This is good news for investors.
2. MAIN – MAIN STREET CAPITAL
Main Street Capital Corporation is a private equity firm specializes in equity capital to lower middle market companies. The firm also provides debt capital to middle market companies for acquisitions, management buyouts, growth financings, recapitalizations and refinancing.
Launced in 2007, the stock price of MAIN currently stands at 35.38€. MAIN pays out an annual dividend on 1.92 EUR (2.26$) per share.
On the contrary to SLG, MAIN has been consistently growing their revenue, except the COVID affected 2020. Here is their revenue chart:
On the other hand we also take a look at the dividend growth chart of MAIN. This tells a slightly different story. MAIN has also seen a consistent increase in the dividend, but a slight decline recently. The COVID19 Pandemic affected all economies badly, and consequently financial corporations have taken a slight hit.
Is this enough data to guarantee 100€ per month in dividends?
Is this enough data to decide on investment? Not necessarily. You have studied the stocks revenue and dividend growth, but what about the relative growth??
To truly gauge a stock’s performance it is necessary that we review it against S&P 500. Due to its global scope, S&P 500 is now considered as the leading benchmark index. By comparing a few essential stock data to S&P 500, you understand the stock’s relative performance.
Firstly I studied PRICE RETURN, followed by its TOTAL RETURN.
PRICE RETURN: This is a statistical index that takes a stock’s capital appreciation. Price Return simply represents the growth in the company’s share price.
TOTAL RETURN: This is likewise a statistical index, but it takes into account of several forms of income. For example – dividends, interests, lending fees and so on.
However, just studying Price return and Total Return would not give much meaningful insight. Hence, it is necessary that we compare the Price Return and Total Return of a stock with S&P500. As a result of doing this, we understand how much the stock has appreciated relative to the benchmark index. Here is a table for a better understanding:
- Comparing the ONE YEAR Price Return of S&P 500 (33.32%) with SLG (50.75%) shows that the price return has been higher than the benchmark index in the past year. However, comparing the 5 YEAR average shows that S&P 500 has a 100% return on price, whereas SLG carries a negative return of (-34.66%)
- Likewise, comparison of ONE YEAR Total Return of S&P 500 (35.40%) with SLG (60.09%) makes for a higher return. But the 5 YEAR total Return comparison tells a different story, with the Total return of SLG being negative (-19.73%).
- On the contrary, making a comparisons for MAIN tells a different story. Both statistical indices in the 1 YEAR comparison show that MAIN has been almost on par with S&P 500. And the 5 YEAR Comparison shows MAIN made a positive return, unlike SLG.
- But this does not mean SLG and MAIN are losing money. Investment is always about the long run, as we saw the differneces between 1 and 5 year comparisons. Infact, recent performance of the stock does not mean it is going to repeat that exact way in the future. By comparing with S&P 500 we understand the relative performance of the stock. For instance, try comparing a few other stocks with S&P 500, and you would figure out its relative performance.
This is how I invest in stocks and make 100€ per month in dividends!
YES! Just as I explained in this article so far, I follow the same steps before deciding on a stock’s performace. I invest in these two stocks, namely SLG and MAIN. Here, take a look at the monthly dividends reflecting in my Scalable Capital depot!
The picture above shows that I have earned 42.37€ from MAIN and 56.46€ from SLG, in the month of June and July.
But these two stocks are not the only ones that pay monthly dividends. In addition to SLG and MAIN, you must take a look at these stock listings
- AGNC – AGNC Investment Corp
- STAG – STAG Industrial, Inc
- GAIN – Gladstone Investment
- GLAD – Gladstone Capital
- GOOD – Gladstone Commercial Corporation
In conclusion, these are some of the stocks I would suggest you to invest in!
Of course, it is necessary that you do proper research on these stocks before you start investing in them. You can follow the same steps that I did to study several statistical indices of the stocks. None of this is financial advice from my side. I have shared you my experience and opinions.
After doing your own due dilignece, you can start investing in stocks that pay dividends via Scalable Capital!
Furthermore, you can set up your own Savings Plan (SPARPLAN) to invest a fixed amount of money every month. Start investing for as low as 25€! You can read our blog on how to create a savings plan and invest in the stock market automatically here.