If You Invest $500 a Month in This High-Yield Dividend Stock, Here's the Dividend Income It Could Produce Over 10 Years (Spoiler: It's More Than $23,000)
Key Points
Verizon's dividend yield is very generous.
It's also been growing steadily, though not briskly.
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Verizon Communications (NYSE: VZ) is a blue chip stock worth considering -- especially if you're seeking dividend income. Its recent dividend yield was a fat 6%. Let's see how much income you might collect from the telecommunications giant.
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Imagine, for example, that you invest $500 a month in it, or $6,000 per year. The table below shows what your investment might grow to if it grows at 8% annually for various periods. I picked 8% to be a bit conservative; over many decades, the S&P 500 has averaged annual returns close to 10% (ignoring inflation).
Of course, Verizon stock hasn't been the fastest-growing over the long run, averaging just 2% annual gains over the past 15 years (with no dividend reinvestment). But over the past three years, it has averaged 13.3% gains annually.
Here's how your money might grow with 8% annual gains if you invest $6,000 annually ($500 per month) or if you can wing $12,000 annually:
|
Growing at 8% for |
$6,000 invested annually |
$12,000 invested annually |
|---|---|---|
|
Five years |
$35,199 |
$70,399 |
|
10 years |
$86,919 |
$173,839 |
|
15 years |
$162,913 |
$325,825 |
|
20 years |
$274,572 |
$549,144 |
|
30 years |
$679,699 |
$1,359,399 |
|
40 years |
$1,554,339 |
$3,108,678 |
Source: Chart by author using calculations from Investor.gov.
As for dividend income, an initial $6,000 invested will generate $360 in year one. Over the past decade, Verizon's payout has grown at an average annual rate of about 2.3%. If that growth rate continues and the dividend yield remains constant (which is unlikely), in year two, with $12,000 invested, you'd collect around $742. In year three, $1,146. In year 10, you'd have $60,000 invested in Verizon, and you'd collect around $4,697 that year in dividends. Add the numbers over a decade, and it totals around $23,700 in dividend income!
Those numbers are based on several assumptions, but clearly, a long-term investment in Verizon Communications could pay off well.
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Selena Maranjian has positions in Verizon Communications. The Motley Fool recommends Verizon Communications. The Motley Fool has a disclosure policy.
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