How to Make $100 a Month in Dividends: Your Simple Guide to Monthly Income

Getting an extra $100 a month without working more hours sounds pretty sweet, right? That’s exactly what dividend investing can do for you. I’ve been down this road myself, and while it’s not an overnight success story building a dividend portfolio that pays you monthly is totally doable with some patience and smart choices.

Let’s cut through the noise and get straight to what works Here’s my no-nonsense guide to making $100 a month from dividends

What You’ll Need to Invest to Make $100 Monthly

The amount you need to invest depends on the dividend yield of your stocks Based on the article from Nasdaq, to generate about $100 per month ($1,200 annually) in super safe dividend income, you’d need to invest approximately $13,800 split between three ultra-high-yield stocks with an average yield of 871%.

Here’s a simple breakdown:

Remember though, higher yields often (but not always) come with higher risk. So there’s a balance to strike between yield and safety.

3 Ultra-High-Yield Stocks to Consider

According to the Nasdaq article, these three stocks combined offer an impressive 8.71% average yield:

1. Enterprise Products Partners (EPD) – 7.62% yield

Enterprise Products Partners is an energy company with a strong track record:

• Has raised its base annual distribution for 25 consecutive years
• Returned nearly $51 billion to investors since going public
• Works as a midstream operator (transport and storage), not a driller
• About three-quarters of its contracts are fixed-fee, providing predictable cash flow
• Less affected by oil price volatility than drilling companies

2. PennantPark Floating Rate Capital (PFLT) – 11.26% yield

This business development company (BDC) offers the highest yield of the three and pays dividends monthly:

• Invests in middle-market businesses
• Portfolio consists primarily of debt securities ($906.3 million out of $1.07 billion total)
• 100% of debt securities are variable rate, benefiting from rising interest rates
• Diversified across 131 companies, with average investment of $8.1 million
• Has raised its monthly dividend twice in 2023

3. Verizon Communications (VZ) – 7.24% yield

This telecom giant offers a yield near its all-time high:

• Benefits from the ongoing 5G revolution
• Shows low retail postpaid churn and increasing wireless service revenue
• Added over 400,000 net broadband customers for four consecutive quarters
• Trading at a forward P/E ratio of 8, which provides a safe floor
• Broadband services encourage high-margin service bundling

Building Your Dividend Portfolio Step by Step

1. Start Where You Are

You don’t need $13,800 right away. I started with just $500 and built from there. Here’s how you can approach it:

• Monthly investment approach: If you can save $500 monthly, you could reach the $13,800 target in less than 3 years.
• Reinvest dividends: Use a DRIP (Dividend Reinvestment Plan) to compound your returns faster.
• Start collecting some dividends immediately: Even a smaller portfolio will generate some income while you build.

2. Choose the Right Account Type

Where you hold your dividend stocks matters for tax purposes:

• Tax-advantaged accounts (IRA, 401k): Best for high-yield stocks that don’t qualify for preferred tax rates
• Taxable brokerage accounts: Can take advantage of qualified dividend tax rates (0%, 15%, or 20% depending on your income bracket)
• Roth IRA: Provides tax-free growth and withdrawals in retirement

3. Diversify Beyond Just the Highest Yields

While the three stocks mentioned above offer impressive yields, diversification is key to reducing risk:

• Mix high-yield with dividend growth: Some lower-yield stocks increase their payouts substantially over time
• Consider different sectors: Don’t put all your money in energy or financials
• Add some monthly dividend payers: Stocks like PFLT or certain ETFs pay monthly rather than quarterly

Beyond Individual Stocks: Other Ways to Earn Dividend Income

Dividend ETFs and Funds

If picking individual stocks seems overwhelming, consider these alternatives:

• High-dividend ETFs: Funds like SCHD, VYM, or HDV offer diversification with decent yields
• Covered call ETFs: Funds like JEPI or XYLD use options strategies to generate higher income (7-10% yields)
• Monthly dividend ETFs: SPHD or SDIV pay dividends every month instead of quarterly

Real Estate Investment Trusts (REITs)

REITs must distribute 90% of taxable income to shareholders, resulting in higher yields:

• Residential REITs: Own and manage apartment buildings or rental homes
• Commercial REITs: Focus on office buildings, malls, or warehouses
• Specialty REITs: Data centers, cell towers, or healthcare facilities
• REIT ETFs: Provide broad exposure to the real estate sector

Common Mistakes to Avoid (I’ve Made Some of These!)

1. Chasing yield without considering sustainability: The highest yields are often red flags for potential dividend cuts
2. Ignoring dividend growth: A 3% yielder that grows its payout by 10% annually can outperform a static 6% yielder over time
3. Lack of diversification: Putting all your money in a few high-yield stocks can be risky
4. Forgetting about inflation: Your goal should be income that grows faster than inflation
5. Overlooking total return: Sometimes lower-yield stocks with price appreciation deliver better overall results

My Personal Approach to Building Dividend Income

I’ve found success by combining different dividend strategies:

• Core holdings: 60% in solid blue-chip dividend stocks and ETFs (3-5% yields)
• Growth component: 20% in lower-yield dividend growth stocks (1-3% yields but 10%+ annual dividend increases)
• High-yield portion: 20% in carefully selected high-yield opportunities (7-12% yields)

This balanced approach has helped me build reliable income while still growing my portfolio value.

FAQ: Your Dividend Questions Answered

How long does it take to build a $100/month dividend portfolio?

With consistent investments of $500 monthly and reinvested dividends, you could reach $100/month in about 2-4 years depending on your yield and market conditions.

Are dividends guaranteed?

No, companies can cut or eliminate dividends during tough times. This is why quality and dividend history matter when selecting investments.

Can I live off dividend income?

Yes, many retirees do this! But it typically requires a larger portfolio. For example, to generate $3,000 monthly ($36,000 annually) with a 4% yield, you’d need about $900,000 invested.

Do I have to pay taxes on dividends?

Generally yes, but qualified dividends receive preferential tax treatment. Holding dividend stocks in retirement accounts can also provide tax advantages.

Final Thoughts: Patience Pays (Literally!)

Building dividend income takes time. When I first started, seeing those small $5 or $10 dividend payments didn’t exactly feel life-changing. But as my portfolio grew, so did those payments—eventually reaching and exceeding that $100 monthly target.

The beauty of dividend investing is that once established, this income stream requires minimal maintenance while potentially growing year after year.

Whether you choose to invest in the three ultra-high-yield stocks mentioned from the Nasdaq article (Enterprise Products Partners, PennantPark Floating Rate Capital, and Verizon) or create your own diversified portfolio, consistency is key.

Start today, stay patient, and before you know it, you’ll be earning that $100 monthly dividend income—possibly growing to much more over time!

What questions do you have about building your dividend portfolio? I’d love to help you get started on your journey to passive income!