How Much to Invest to Get $500 in Dividends Every Month

Wondering how to earn $500 per month in dividends? Here’s how much cash you will need based on the level of risk you are willing to take.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Investing in stocks for dividends may be relatively easier when compared to other passive income earning opportunities. However, it is no cake walk.

Look for business quality over big dividend yields

When investing for dividend income, you need to look beyond a high yield. In fact, high yielding dividend stocks (like those yielding over 7%) often have many inherent business or financial risks that could mean the dividend is actually not safe at all.

It is crucial for dividend investors to really understand the business, assets, management, and balance sheet of the stocks they are looking to buy. This is especially true in a time where interest rates are rapidly rising. Cheap debt is no longer available and rising rates can severely damage an overly leveraged dividend stock.

How much cash do you need to earn $500 per month?

After keeping these thoughts in mind, you might be wondering how much cash you would need to earn $500 of dividends every month. On an annual basis, you are looking to earn $6,000 per year.

The average dividend yield on the S&P/TSX Composite Index is 3.3%. If you wanted to earn $6,000 per year (or average $500 per month) at that rate, you would need to invest at least $181,818.

That is a good baseline for expectations. Fortunately, many dividend stocks have fallen this year. Several good stocks are yielding significantly higher than the average. If your portfolio averaged a 5% yield, you would only need to invest $120,000 of initial capital.

You could even look to average a 7% yield. You would only need $85,715 of initial capital. However, you would likely be taking on significantly higher risk with a portfolio like that.

Dividend stocks like Pembina Pipeline are good for income

Investors are better off hunting in the 4–6% dividend yield range. One solid stock to consider is Pembina Pipeline (TSX:PPL). Pembina operates a diverse mix of crucial energy assets (think pipelines, processing facilities, storage, and export facilities) for the Western Canadian energy industry.

Created with Highcharts 11.4.3Pembina Pipeline PriceZoom1M3M6MYTD1Y5Y10YALL0www.fool.ca

Pembina stock yields 6.08% at today’s price of $43.94 per share. Its dividend is supported by generally long-term contracted cash flows. However, when energy prices rise, it also gets considerable upside from reselling its processed energy products. If you anticipate natural gas and oil prices rising in the next few years, there could be additional upside for the stock.

Pembina has been yielding excess cash after covering its capital expenditures and dividend. The energy company has one of the best balance sheets amongst its energy infrastructure peers. It is in a strong position to be able to invest in broader growth opportunities (like LNG or a larger egress pipeline project).

While this is not a growth stock, shareholders should expect their dividend to be safe and enjoy potential upside if it can execute profitably on its capital growth plan.

If you wanted to earn $500 on average per month, you would need to buy 2,250 shares. That would cost you $98,9865, but would yield $1,501.87 quarterly, or $500.62 averaged monthly.

The Foolish takeaway

Here at the Fool, we don’t recommend you sink that much cash into one stock (unless it is a part of a larger diversified portfolio). However, this is to demonstrate that you can find attractive dividend yield at today’s prices and valuations.

Look for a balance of attractive yield and dividend sustainability. Build a portfolio with at least 10–12 of these types of stocks, and you can yield an attractive dividend stream over time.

COMPANYRECENT PRICENUMBER OF SHARESDIVIDENDTOTAL PAYOUTFREQUENCY
Pembina Pipeline$43.942,250$0.6675$1,501.87Quarterly
Prices as of November 10, 2023

Should you invest $1,000 in Sandstorm Gold Ltd. right now?

Before you buy stock in Sandstorm Gold Ltd., consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Sandstorm Gold Ltd. wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $21,058.57!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 38 percentage points since 2013*.

See the Top Stocks * Returns as of 2/20/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Robin Brown has no position in any of the stocks mentioned. The Motley Fool recommends Pembina Pipeline. The Motley Fool has a disclosure policy.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Energy Stocks

A person looks at data on a screen
Energy Stocks

Enbridge Stock vs. Cameco: Which One Is a Better Buy on the Dip?

Consider Enbridge (TSX:ENB) and another great momentum play to energize your TFSA.

Read more »

man touches brain to show a good idea
Energy Stocks

Trump Tariffs: Are Canadian Energy Stocks Still a Safe Haven for Investors?

Amid Trump’s tariffs, can Canadian energy stocks still shelter your portfolio? Let's identify the risks and opportunities.

Read more »

grow money, wealth build
Energy Stocks

Down 30% From Highs: Is This TSX Growth Stock a Screaming Buy?

This TSX stock may be down now, but don't count it out. With plenty of growth opportunities already underway, now…

Read more »

A worker overlooks an oil refinery plant.
Energy Stocks

Dividend Investors: Top Canadian Energy Stocks for March

These two energy stocks have increased payouts and have strong outlooks, making them potentially ideal picks for dividend investors.

Read more »

oil and natural gas
Energy Stocks

3 Top Energy Sector Stocks for Canadian Investors in 2025

Despite ongoing uncertainty amid the tariff war with the U.S., these three TSX energy stocks can be strong long-term holdings…

Read more »

Oil industry worker works in oilfield
Energy Stocks

Is Whitecap Resources Stock a Buy for its 7.8% Dividend Yield?

Whitecap stock's recent merger with Velen sent shares dropping, but this could mean there's a value opportunity.

Read more »

oil pump jack under night sky
Energy Stocks

Canadian Natural Resources: Buy, Sell, or Hold in 2025?

This energy stock has certainly made an impression on investors in the past. But with tariffs coming down hard, what's…

Read more »

Offshore wind turbine farm at sunset
Energy Stocks

Best Stock to Buy Right Now: Brookfield Renewable vs TransAlta Renewables?

These two energy stocks look primed to explode, and at these prices, investors would do well to pick them up…

Read more »