Passive Income: How To Make $100 Per Day With Dividends

What's up guys? It's Graham here. So instead of the usual Doom and Gloom, let's talk about this: how to make a hundred dollars a day with dividends starting from zero dollars the easy way, coming from someone who's done exactly that. In fact, my dividend portfolio currently makes just over ninety thousand dollars a year, and the strategies for getting there were rather simple.

After all, with the stock market having already declined more than 20 percent, the economy in shambles, and inflation out of control, dividends can help offset the loss of the Stock's value. They increase the more the market goes down, and anyone could get started making extra money immediately with as little as a dollar.

So let's discuss exactly what you could do: the good, the bad, the ugly of dividends, which strategy has the potential to make the most amount of money, and then finally the step-by-step blueprint that you could use to go from zero to a hundred dollars a day—all for the cost of subscribing if you haven't done that already. And as a thank you for doing that, here's a picture of a kitten.

So thank you guys so much! And also, a big thank you to Wealthfront for sponsoring this video, but more on that later.

Alright, so in terms of where to start, we have to talk about the basics of dividends. See, anytime you buy a stock, that entitles you to a portion of that company's profits. And every now and then, those profits are distributed to you on a regular basis in the form of a dividend.

So if one share is paying out five dollars a year and it's currently trading for a hundred dollars, that means you'll be getting a five percent return. And because of that, the dividend yield could move higher or lower depending on what price the stock is selling for.

Of course, not every stock pays a dividend, but when they do, they usually range anywhere from less than one percent to sometimes more than ten percent depending on the company. Although, you'll tend to find the strongest stocks paying anywhere from one to five percent every single year, which is probably going to be the easiest passive income you will ever make in your entire life.

For example, with a company like Chevron, you'll get 3.6 percent just for holding on to the stock, which means for every one thousand dollars you invest, you'll get a free 36 dollars deposited back into your account on a regular basis, on top of the stock price also moving up in price hopefully.

The benefit from an investment standpoint is that you'll be able to receive predictable cash flow on a regular basis without having to sell any shares, and this gives you leftover money that you could then use to reinvest into buying even more investments, or I guess you could go and buy a jet ski if that's your thing—whatever floats your boat.

However, when it comes to doing this, just like with anything, there are some pros and cons that need to be considered. So if you eventually want to scale this up to a hundred dollars a day, here's what you're up against.

But first, let's start with the good.

Number one, you're insulated from the stock market for the most part. You'll get the exact same dividend payment to the exact same amount regardless if the stock trades for twenty dollars or forty dollars, and for someone who's expecting consistent cash flow, this helps smooth out the fluctuations in the market.

Second, dividend payments are a lot less volatile than stock prices. For example, the SimpliSafe Dividends blog found that from 1900 through 2018, dividend payments remained fairly constant with an average variance of plus or minus 10 during market downturns.

When you compare that to the S&P 500, you'll quickly see that there's a lot more volatility, and for someone who wants consistent cash flow, it's a lot less to stomach.

Third, throughout recessions, dividend payments sometimes even increase. Simply Safe Dividends points out that in three of the above recessions, dividends paid to investors actually increased, including a 46% jump during the first recession following World War II.

You know, even though such an increase doesn't happen every time, the average dividend cut is just a mere half a percent compared to the stock market's average decline of 32 percent.

Fourth, dividend stocks have been shown to have a comparable return to the overall market. In fact, Fidelity found that dividends accounted for 54 percent of market returns during times when inflation was above five percent.

That means that even though they might not be the stocks that go up the most during a bull market, they also don't fall the most during a crash.

And fifth, depending on your tax bracket, dividends could actually be taxed at a lower rate. I'll cover this one in more detail towards the end of the video, but if you receive a qualified dividend, you could pay no tax whatsoever if you're single making under forty-one thousand dollars a year or married making less than eighty-three thousand dollars a year.

However, even though all of that sounds fantastic, we can't have a balanced discussion about dividends without also talking about the downsides.

First, dividends are not guaranteed. Even though companies generally try to avoid cutting or reducing dividends, it does happen. And because dividends are a reflection of a company's profits, in the event of a downturn, they may choose to turn off the money faucet until conditions improve.

Second, dividend payments mean nothing when the company itself declines in value. In this case, earning a five percent yield might actually lose you money when the stock declines 30% in value, and there are plenty of examples of exactly this.

Now sure, there's a chance the price recovers while you sit back and collect all that cash flow, but there's also a chance it doesn't, and that needs to be considered.

Third, even though there can be some tax advantages, there could also be some tax disadvantages. See, unlike buying a stock and only paying tax when you sell, dividends are taxed the moment you receive them.

And depending on your tax bracket, that could be as high as 20 percent or more.

And fourth, dividends may flat out just be irrelevant. Two very well-known economists argued that dividend payments don't matter at all because it has zero effect on the company or their cost of capital. In this case, they explained that if an investor actually needs the money, all they have to do is sell the stock, and the dividends don't actually create any more value for the company itself.

It's kind of like saying instead of paying a two percent dividend, the stock price will just go up by an extra two percent, where both scenarios leave you with the exact same amount of value.

Although all in all, I'll admit, as someone who invests in both growth stocks and receives dividends from a variety of holdings, I do think that there are some major advantages for anyone who wants to do this to make passive income.

And in terms of the step-by-step blueprint that you could use to go from zero to a hundred dollars a day, here's what you need to know.

Although before we go into that, while we're on the topic of money and investing, I have to say, even though most assets are falling in price for the first time in years, savers are finally being rewarded. And the sponsor of this portion of the video, Wealthfront, is there to make it that much better.

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Just for comparison, the national average is 0.17 percent, and without exaggeration, I've been using the Wealthfront account for years, even before any paid sponsorship. In fact, you can see my video from back in 2019 where they became my favorite cash account, and I was talking about them simply because I enjoyed their product that much.

Of course, if you're curious how they could offer that much in interest, the simple answer is that the Federal Reserve interest rates have been going up, which means banks earn more money on your deposits. So instead of keeping all of it, Wealthfront passes on a higher percentage of each rate increase to you, with hopes that you'll explore some of their other products as well.

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And now with that said, let's get back to the video.

Alright, so in terms of building up a dividend portfolio, contrary to what most people think, there are some companies out there who have never missed a dividend payment ever.

And before going into the step-by-step blueprint of how you would be able to build up passive income, we first have to talk about the dividend Aristocrats. This is a select group of 65 S&P 500 companies who have consistently increased their dividend payouts for more than 25 years.

They fit a strict criteria of growth, size, and the ability to continue increasing your payouts. And throughout the last 30 years, they found to have outperformed the S&P 500 by nearly one percent on an annual basis. In fact, over the last two decades, there have only ever been two years of negative growth: one in 2008 and another in 2018.

Beyond that, dividend Aristocrats have continued growing above and beyond the average.

On top of that, a good portion of these companies tend to outperform the market during a time of recession. And even though they could certainly decline in price alongside everything else, they tend to decline a lot less. Not to mention, psychologically, I have to say there is an element of receiving dividends that makes it much easier as a long-term investment strategy.

Because by consistently receiving scheduled payouts, you're much less likely to worry about the day-to-day fluctuations or panic when you see everything falling in price.

But when it comes to my own strategy and how you could use this to eventually make a hundred dollars a day, here are my own thoughts.

To start, throughout the last 15 years, I've tried pretty much every strategy possible when it comes to passive income.

The first was real estate. When I was 21 years old, I purchased my first rental property, and even though I was able to make about a thousand dollars a month, it was a lot of work. No joke, I probably spent about a year looking at properties and making offers, another few months fixing it up, and then another month to rent it out, only to have all of it wiped away when that tenant stopped paying.

Now since then, I've continued buying rental properties across Southern California, and overall, I've had a really positive experience with my current cash flow coming in at about twenty-two thousand dollars a month. But not only did that take a lot of work, but I manage a few of them myself, and there are still some random things that come up that need to be accounted for. So this one is more like a part-time side hustle than an investment.

In addition to that, I've long thought that YouTube would generate some passive income if I ever decided to stop posting, but I quickly realized that if you want YouTube to continue to push your content, you have to be constantly uploading, so that's a full-time job.

Now everything else—from affiliate marketing, online programs, self-storage facilities, and absentee-owned businesses—carries a lot of risk long-term with a low likelihood that the income will continue at the same trajectory.

But my dividend investments have been the most passive income that I've possibly been able to make. And in terms of where and how I'm invested, it's rather simple. The vast majority of my money is currently split between an S&P 500 Index Fund, which currently pays 1.65 percent, and an international Index Fund, which is paying 3.76 percent.

I also have a few dozen individual stocks that pay anywhere between half a percent and five percent, ranging from Apple to Exxon to Simon Property Group. And I take the boring approach of just dollar-cost averaging on a regular basis, no matter what price they trade at.

The goal was that the dividend should never be the primary focus of the portfolio, but it should provide a steady source of income that I could continually reinvest or redeploy as needed. And that should get my portfolio just a little bit more stability thanks to Jerome Powell.

The way I see it is that dividends could be the icing on the cake rather than being the cake itself. And over time, I've been able to build that to a ninety thousand dollar a year income that's completely hands-off and passive.

So in terms of how you would be able to build your own icing on the cake passive income portfolio that generates up to a hundred dollars a day starting from zero, here's my own advice. If you just look at this from an "I want to make a hundred dollars a day as fast as possible" perspective, the easiest answer is really just a simple math equation.

If your average dividend payment is three percent, then you'll need 1.2 million dollars invested to reach 100 dollars a day. Something like this is not impossible, and by investing an average of 17 dollars a day, you should be able to reach that amount in 35 years, assuming an eight percent return on your money.

Bump that up to thirty dollars a day, and you could get there in 28 years. And if you're able to invest fifty dollars a day, you'll get there in 22 years. Not to mention, if you're investing in a company that pays more than three percent, you could accomplish the exact same goal with a lot less.

For example, both Walgreens and VF Corporation are dividend Aristocrats who are paying a six percent dividend. If a hundred dollars a day is your only goal, you could get there by investing six hundred thousand dollars, which could be accomplished by investing thirty dollars a day for twenty years.

Of course, the downside is that in the short term, both of those stocks have had a rather terrible year, but the dividend still remained if that's your main focus.

Now I know that's not what you probably wanted to hear, and you were expecting something a lot more revolutionary that might make this happen in a much quicker amount of time. But thankfully, many of these companies do end up increasing their dividend payments over time, so the return might actually increase at a much quicker pace than expected.

Although the reality is doing this will either require a lot of time or a lot of money, and that's what I feel holds so many people back from even trying.

After all, it's not necessarily the work because once you open up a brokerage and enable auto-invest, you're pretty much done in 20 minutes, but instead, it's the impatience of staring down another 20 years and thinking to yourself, "It's going to take too long. I'd rather just day trade crypto instead."

But I will say, just like going to the gym, once you start, you're not going to want to stop. Like I've never met anybody earning five dollars a day passively who isn't thoroughly excited about the idea of getting to earn money without having to lift a finger every single time.

Once you see the momentum beginning to build, you're going to become just as obsessed as I have, and you'll do anything possible to continue to grow it because it's fun.

However, just keep in mind that, like the VF and Walgreens examples, even solid dividend Aristocrats could still be risky if the underlying stock declines in value, and sometimes it could be better just not to take the dividend and opt for stock growth instead.

Although personally, I think a well-diversified portfolio should have a bit of a mix of both. On the one hand, dividends should smooth out volatility, give you consistent cash flow, and allow you more money left over to reinvest.

But the rest of it should help grow your net worth, even if your portfolio looks like a roller coaster in the short term.

So with that said, you guys, thank you so much for watching! Also, a big thank you again to Wealthfront for sponsoring this video. Feel free to add me on Instagram. Thank you so much for watching, and until next time!