Here's How Much You'd Need to Invest in VIG to Generate $1,000 per Month in Dividends
Key Points
The Vanguard Dividend Appreciation ETF (VIG) is one of the best long-term dividend growth funds available.
Its 1.4% yield isn't terribly exciting, but it can still generate hundreds of dollars of dividend income every month.
Here's the math on how to make a $1,000 monthly dividend from VIG a reality.
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The Vanguard Dividend Appreciation ETF (NYSEMKT: VIG) is one of the more solid investments out there. Its focus on stocks that have grown their dividend annually for at least 10 consecutive years helps ensure a portfolio of quality companies with a growing passive income stream.
While this fund excels as a dividend growth strategy, it's not very big on yield. Because it excludes the top 25% of yields in its stock selection process, the remaining choices generate only a current yield of 1.4%. That's better than the S&P 500's 1% yield but below that of many other dividend ETFs.
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Still, a significant dividend income stream is possible with the right initial investment.
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In order to generate $1,000 per month in dividends (or $12,000 annually), you would need to invest around $857,000 in the Vanguard Dividend Appreciation ETF to make it happen.
That investment is large, but keep in mind that this fund has also returned approximately 13% per year in share price appreciation over the past decade and around 10% per year since its inception in 2006. Investing smaller amounts now and incrementally over time, as well as reinvesting dividends, will help increase the dividend income you receive later when you turn off dividend reinvestment. The reinvested dividends purchase more shares, which in turn grow the amount of dividends earned even further.
Setting a goal of $1,000 per month in dividend payouts from the Vanguard Dividend Appreciation ETF may seem challenging. But consistent long-term investing will steadily ease the challenge for that time years from now when you will need it in retirement.
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David Dierking has positions in Vanguard Dividend Appreciation ETF. The Motley Fool has positions in and recommends Vanguard Dividend Appreciation ETF. The Motley Fool has a disclosure policy.
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