January 14, 2012

How to make a living from dividends?

Wouldn't it be a nice thing to get enough money from dividends so that it will cover 150 percent of your expenses? No more worries about the Greece economy, where oil is going, or whether JP Morgan is manipulating the price of silver! Just hang around on the beach and buy pineapple from your dividends. This is how it should be done:
  1. Spend less than what you earn and invest the rest in dividend paying stocks. Bonus money you may receive should go to buying more stocks - not spend more
  2. Invest your money very conservatively. Do not chase hot stocks and do not try to time the market
  3. Buy safe companies - that is companies with a track record of paying dividends regularly, a low P/E ratio, companies with a good business model, and so on
  4. Sell the stocks that do not perform - that is the company is not paying any dividend anymore - or cuts it
  5. Buy many different companies - you will not notice a dividend cut if you have 40 companies in your portfolio
  6. Reinvest the dividends

Source: Seeking Alpha