Here's How Many Shares of VOO You'd Need for $500 in Monthly Dividends
Key Points
The Vanguard S&P 500 ETF (VOO) is one of the best funds available for generating long-term wealth.
But its total returns these days have been coming largely from capital growth, not dividends.
Still, you can capture that long-term growth potential and generate a passive income stream.
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The Vanguard S&P 500 ETF (NYSEMKT: VOO) has become a $1 trillion fund on the back of the "Magnificent Seven" stocks and the artificial intelligence (AI) revolution. Not only is it an ideal core portfolio holding, but its tech-heavy sector concentration has also made it an elite performer.
Most people use the Vanguard S&P 500 ETF as a long-term growth vehicle, which is what it's best suited for. But it can also be used as an income generator. Given its current yield of just 1%, income isn't its primary return delivery mechanism. But with the right number of shares, you can still produce hundreds of dollars of monthly income.
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Let's take a look at the math.
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To generate $500 per month in dividends (or $6,000 annually), you'll need an initial investment of approximately $600,000. Vanguard S&P 500 ETF shares currently trade at almost $700 even. That means you'll need to own approximately 857 shares to create a $500 monthly income stream from this fund.
Obviously, with yields so low, now may not be the best time to use the S&P 500 as a passive income producer. Dividends can still be a significant part of an investment's total return. But the AI boom has made lower- or non-yielding tech stocks a much bigger part of the economy.
If you're looking to create a passive dividend income stream, a dividend ETF geared toward that purpose is likely the better choice today.
Should you buy stock in Vanguard S&P 500 ETF right now?
Before you buy stock in Vanguard S&P 500 ETF, consider this:
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David Dierking has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.
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