All right, so are you ready to dive into the world of dividend stocks?
Always ready for a deep dive, especially when we're talking about that sweet passive income.
Well, today we're taking a look at a video by YouTube finance influencer Sarah Finance.
Oh yeah, I've seen her stuff. She's got some pretty interesting takes.
In this one, she claims to be making a cool thousand dollars a month passively, just from dividends.
Wow, a thousand dollars a month, that's pretty significant.
It's from her video. It's called Top 9 Dividend Stocks That Pay Me Other Thousand Dollars Per Month Passive Income.
Okay, so she's laying out her top picks, huh?
Exactly, and we're going to break it all down and see if her strategy holds water.
And you know, more importantly, if it's something that our listeners could actually replicate.
Love it. Let's get into it.
So to kick things off, Sarah uses a company called Craftains to explain how dividend stocks work.
Okay, I'm familiar with Craftains. Good example.
So let's say you buy one share for $43 and it has a dividend yield of 3.64%.
All right, so you're getting a little over 3.5% back each year just for owning the stock.
Right, you'd get $3.64 per year just for holding onto that share.
Essentially free money.
Pretty much. I mean, you're not actually doing anything to earn that money. You're just holding the stock.
That's the beauty of passive income.
Now, when it comes to her top picks, Sarah's got a mix of, you know, those classic stable companies.
But ones you'd expect like blue chips.
Yeah, and a few that might surprise you.
How interesting. Like what?
Well, first up, we've got Coca-Cola.
Coca-Cola classic tried and true.
Yeah, I mean, who hasn't had a Coke at some point, right?
It's a global brand. Everyone recognizes it.
Exactly. And it feels pretty safe as an investment.
For good reason. They've been around forever and they've increased their dividend for 59 years straight.
59 years. Wow.
That's right. Even Warren Buffett has a huge stake in Coca-Cola.
That says a lot.
He's not known for making risky bets.
So Coca-Cola stability reliability.
Yeah, for a living.
All right. Next up, Sarah mentions Ryokin, which is a REIT.
REIT's real estate investment trusts.
Exactly. And I think this one would appeal to people who like the idea of real estate,
you know, but maybe they're not quite ready to buy a whole property.
It's a way to dip your toes into the real estate market without having to deal with all the headaches of being a landlord.
Yeah, you don't have to worry about tenants or repairs or any of that stuff.
Exactly. REIT's own and manage income producing properties.
And they tend to have higher than average dividend yields.
So with Ryokin, we're looking at a 4.5% yield.
Not bad at all.
But of course, not all REITs are created equal.
Right. You always want to do your research.
Look into the types of properties they hold, occupancy rates, you know, how well they're managed, all that good stuff.
Do diligence is key.
Absolutely.
Okay. Then we have Johnson and Johnson.
Another household name.
I mean, who hasn't used a Band-Aid or some baby powder at some point, right?
They've been around for over 130 years.
Talk about stability.
And then just like Coca-Cola, they've increased their dividend for 59 consecutive years.
It's incredible how these companies have maintained that consistency for so long.
It speaks volumes about their commitment to their shareholders.
All right, now get this.
Sarah's next pick has a 7% dividend yield.
7%. Now that's interesting.
It's Imbridge.
An energy company involved in transporting oil and gas.
Okay. So we're moving into a slightly riskier territory.
Potentially. But that yield is pretty tempting.
It is. Imbridge is a major player in the energy sector, and they've consistently paid dividends for over 66 years.
66 years.
Wow. But here's the thing, that high yield might also signal higher risk.
Because.
Oil and gas are notoriously volatile industries, future regulations.
And regulations. You know, all of that could impact their profitability.
So while that 7% yield is definitely eye catching.
It's essential to understand the potential downsides before jumping in.
Risk and reward.
Always.
All right, so we've got stable giants like Coca-Cola and Johnson-Johnson.
And a potentially riskier but high yield option with Imbridge.
Now Sarah throws a bit of a curve ball into the mix. Canadian bank stocks.
Oh, Canadian bank stocks. Interesting.
She lists TD Bank, Royal Bank of Canada, Bank of Nova Scotia, Bank of Montreal, and Canadian Imperial Bank.
Royal Bank of Commerce.
That's quite a list.
So I'm curious, why would someone outside of Canada even consider these?
That's a great question. Well, Canadian banks have a reputation for being very stable.
They're known for their conservative lending practices.
Right. And they have a long history of dividend payments going back over a century.
Over a century. Wow.
Their yields typically fall between 3% to 5%.
Okay, so not as high as Imbridge, but.
They're considered less volatile than some US banks.
So for investors looking for stability and steady dividends.
Canadian bank stocks could be a good option.
But as always, any investment in a foreign market comes with its own set of risks and considerations.
Absolutely. You always want to do your due diligence.
So we've got a sense of the types of companies Sarah likes.
A good mix of stability, high yield, and international exposure.
But how does she actually suggest reaching that $1,000 a month goal?
That's the million dollar question, right?
Well, Sarah recommends using a commission free broker that offers a dividend reinvestment plan or
DIP for short.
DIP, got it. This is a key part of her strategy.
And it could be a game changer for investors, especially those who are just starting out.
Okay, break it down for us. What's so special about a commission free broker with DRP?
Okay, so first of all, commission free means you're not paying fees every time you buy or sell stock.
Which can add up, especially if you're trading frequently.
Exactly. And DRP automatically takes your dividends and uses them to buy more of that same stock.
So you're essentially using your dividends to buy more dividend making machines.
Exactly. It's like a snowball effect.
The more shares you have, the more dividends you get and the faster your investment grows.
Compounding in action.
And to sweeten the deal, Sarah provides a link in her video description
for a brokerage that gives you a free stock worth up to $250 when you open an account.
No, that's a nice perk.
Definitely a good way to get started.
All right, so we've got the broker and the DRP.
But now the big question is, how much money does it actually take to reach that magical $1,000 a month
in passive income from dividends?
That's the question everyone wants to know, right?
Right. How do we get to that four figure monthly income?
Well, Sarah is very upfront about this.
She says you need around $250,000 invested to hit that target.
Okay, so it's a significant chunk of change.
It is. But she breaks down her strategy into three manageable steps.
Okay, so it's not like you need a quarter of a million dollars right away.
Exactly. It's about building towards that goal strategically.
So what are the steps?
Step one, consistent monthly investing.
Got it. So even if you don't have a ton of money to invest right now,
just start putting away something every month.
Exactly. She suggests aiming for $50 to $300 per month,
but encourages investing more if possible.
So it's all about figuring out what fits into your budget.
And sticking to it consistently?
Consistency is key in investing.
Couldn't agree more.
Yeah.
Now that brings us to step two, which is reinvesting all those dividends initially.
Ah, the DRIP comes into play here.
Exactly. This is where it really shines.
Sarah uses Enbridge as an example.
If you invest $1,000 and get that 7% yield, you earn $70 annually.
So you're taking that $70 and automatically buying more Enbridge stock?
Exactly. And those new shares will generate even more dividends the following year.
It's compounding at its finest.
It's a powerful strategy for accelerating your growth.
And then what's step three?
Step three involves stock price appreciation.
Okay. So this is where things get a little less predictable.
Because you can't control the stock market.
Exactly. Dividend payments are somewhat predictable based on the company's performance
and their dividend policy.
But the stock price itself can fluctuate based on all sorts of factors.
Market sentiment, economic conditions, industry trends,
all of that can impact the stock's price.
So it's important to remember that investing always carries some level of risk.
Even with dividend stocks.
Now I know getting to that $250,000 might seem like a long shot,
especially when you're just starting out.
It can definitely feel daunting.
But Sarah recommends setting smaller milestones along the way.
So instead of focusing on that big $1,000 a month goal,
break it down into smaller chunks.
Like aim for $100 a month in dividends and $200 and so on.
Celebrate those small wins and stay motivated.
Makes sense. It's like running a marathon.
You don't focus on the finish line the whole time.
You break it down into miles.
Exactly. It's all about those baby steps.
Now I'm curious, how did Sarah actually reach that $250,000 milestone?
What's her story?
Well, she's very transparent about her journey.
I appreciate that.
She reveals that her portfolio is currently worth over $250,000.
Okay. So she's actually walking the walk.
And her biggest holdings are Enbridge and Bank of Nova Scotia.
Interesting. So she's got a mix of high yield and stability.
Exactly. She's held these for a long time
and favors their consistent dividend payments.
Makes sense.
But did she have any advantages along the way?
Well, she admits to investing around $5,000 per month,
mostly from her business income.
Okay. So she had a significant amount of capital to work with.
And she was also able to capitalize on the recent market crash,
buying more stocks when prices were lower.
So a combination of factors contributed to her success.
But here's the key takeaway for our listeners.
Don't get discouraged.
It's easy to compare ourselves to others and feel like we're falling short.
Comparison is the thief of joy, as they say.
So true. Focus on what you can control.
Which is?
Invest consistently, even if it's a small amount.
Every little bit counts.
And explore ways to boost your income through side hustles or business ventures, if you can.
So it's not just about your nine to five thing outside the box.
Exactly.
Yeah.
Get creative and find other ways to generate income.
And then funnel that extra income into your investments.
It's about taking control of your financial future.
I love that.
So is that Sarah's big life hack for reaching that $250,000 goal faster,
starting a business or side hustle?
It's a big part of her message.
She's a huge advocate for creating multiple streams of income.
It's about leveraging your skills and passions to create opportunities.
And she practices what she preaches.
She actually links to two of her other videos in the description,
where she dives deeper into side hustle and business ideas.
That's awesome.
She's providing actionable advice, not just talking about it.
Exactly.
And I think that's what makes this so valuable for our listeners.
It's one thing to dream about financial freedom,
but Sarah's giving concrete steps and resources to help make that dream a reality.
It shows that there's always more to learn and explore.
And sometimes the most unexpected paths can lead to the greatest rewards.
Before we wrap up this part of our deep dive,
I want to circle back to something Sarah said that really resonated with me.
Oh, what's that?
She talks about shifting your focus in those early days of dividend investing.
Okay, because it can be a long game.
Exactly.
She admits that going from zero to $1,000 a month in dividends takes time.
And it can feel discouraging if you're constantly fixated on that big number.
So instead of getting overwhelmed by the end goal,
she encourages viewers to celebrate those smaller milestones along the way.
Start by aiming for $100 a month, then $200 and so on.
It's all about taking those baby steps and acknowledging your progress.
What do you think about that approach?
I think it's brilliant.
It's easy to get discouraged when you're focused on a distant goal.
Especially when it comes to investing.
It's not always a quick and easy path.
Right.
So breaking it down into smaller, more achievable milestones makes the journey feel less daunting.
And more enjoyable.
Exactly.
It's like any long-term goal you have to focus on the process
and celebrate those small victories to stay motivated.
It's about building momentum and enjoying the journey,
not just fixating on the destination.
Well said.
And remember, every dollar invested is a step towards financial freedom.
This has been a really insightful look into Sara Finance's approach to dividend investing.
Definitely a lot of valuable information to unpack.
Stay tuned for part two of this deep dive, where we'll explore some of the key takeaways.
And discuss the potential benefits and risks of dividend stocks in more detail.
We'll see you soon.
Looking forward to it.
Welcome back to our deep dive into dividend stocks.
Glad to be back.
So we just explored Sara Finance's personal journey
and her strategy for building that passive income stream.
Right.
She's walking the walk making that $1,000 a month.
Yeah.
It's pretty inspiring.
Now I think it's time to broaden our perspective a bit.
Okay.
Zoom out a little.
Yeah.
And look at the bigger picture of dividend investing.
Love it.
Let's do it.
What are the core concepts?
What are the potential advantages?
You know, all of that good stuff.
So what makes dividend stocks so appealing to investors in the first place?
Why are we even talking about them?
Right.
Well, for starters, they offer this unique combination of potential income and growth.
Okay.
Income and growth.
So you're getting paid dividends.
You're getting that steady stream of cash flow.
Which can be really attractive for folks who are seeking passive income.
Especially for those in retirement who need their investments to generate,
you know, regular income.
Right.
It's like a paycheck from your portfolio.
Exactly.
But it's not just about income.
There's also the potential for growth.
Okay.
But don't dividend stocks tend to grow slower than, you know,
those high-flying tech companies everyone's always talking about?
That's a common misconception.
While it's true that some companies prioritize dividends over rapid growth,
there are plenty of well-established companies with long histories of dividend payments
that also see their share prices appreciate over time.
So you're saying it's possible to have both?
You can have your cake and eat it too?
I like the sound of that.
Yeah.
So dividends come from profits.
And profitable companies tend to grow in value.
It makes sense when you put it that way.
Okay.
Okay, so we've got income and growth potential.
What else is there to love about dividend stocks?
Well, are there any other advantages?
Let's see.
Historically, dividend-paying stocks have tended to be less volatile than non-dividend payers.
So they can provide a bit more stability.
Exactly.
Which can be especially helpful during those, you know, inevitable market ups and downs.
Like a cushion when things get bumpy.
Precisely.
Okay, so we've got income growth stability.
It's all sounded pretty good so far.
But let's be real, no investment is completely without risk.
Of course not.
Every investment has its risks and dividend stocks are no exception.
So what are some potential downsides that we need to be aware of?
Well, one potential risk is dividend cuts.
Dividend cuts.
So a company could just decide to stop paying dividends.
It's not super common, but it can happen.
Companies might reduce or even eliminate their dividend payments if they encounter
financial difficulties, you know, face challenges in their industry or experience unexpected setbacks.
So it's not like a guaranteed paycheck forever.
Exactly.
Which is why it's crucial to do your research and thoroughly assess a company's financial health.
Look at their dividend history.
Their future prospects, all of that before you invest.
Look for companies with the track record of consistent dividend payments
and a business model that seems sustainable over the long term.
Right.
You want to make sure that those dividends are coming from a solid foundation.
Okay.
So due diligence is key.
What other risks should we keep in mind?
Another risk is that some companies might prioritize paying dividends over reinvesting
profits back into growth opportunities.
So they're choosing to reward shareholders in the short term.
But potentially hindering their long term growth potential.
It's a trade off.
It is.
It's all about finding companies that strike a healthy balance between those two priorities.
Look for companies that generate enough profit to both pay dividends and invest in
innovation and expansion.
Right.
You want companies that are growing and sharing those profits with their shareholders.
So we've covered some potential benefits.
And some potential risks.
What are some key takeaways for our listener who might be thinking about adding dividend stocks
to their portfolio?
Okay.
So first things first, diversification.
The golden rule of investing.
It applies to dividend stocks just as much as any other asset class.
Don't put all your eggs in one basket.
Spread your investments across different industries and sectors.
To reduce your risk.
And capture potential growth opportunities across different parts of the economy.
So even if one sector is underperforming.
Your entire portfolio isn't going to tank.
Makes sense.
What else should our listener keep in mind?
Don't chase high yields blindly.
Yes.
Those super high dividend yields can be tempting.
But they can sometimes be a warning sign.
Like a red flag.
It could mean that a company is struggling financially or facing challenges.
So it's not just about chasing the highest number.
Focus on companies with a sustainable dividend payout ratio.
Which means?
They're comfortably paying dividends out of their earnings.
And look for a history of consistent payments.
Right.
You want to make sure those dividends are reliable.
So quality over quantity when it comes to dividend yields.
Absolutely.
It's better to have a sustainable and growing dividend.
Over a high yield that could be at risk of being cut in the future.
That's a really good point to remember.
Okay.
Any final thoughts before we move on to the last part of our deep dive.
One crucial point to emphasize is that dividend investing is a long-term strategy.
It's not a get rich quick scheme.
Exactly.
It's about building a portfolio of high quality companies that generate consistent income.
And grow in value over time.
So patience is key.
Patience, research, and a long-term perspective are essential ingredients for success in dividend investing.
It's about playing the long game.
And being in it for the long haul.
All right.
So now that we've covered the basics, the potential upsides and the risks,
I think it's time to move on to the final part of our deep dive.
Okay.
I'm ready.
Where we'll explore some strategies for actually selecting dividend paying companies.
And aligning your investments with your financial goals.
Let's do it.
We're back for the final part of our dividend stock deep dive.
Oh, I hate the home stretch.
We've covered the basics, the potential upsides, the risks.
We've got the lay of the land.
Now let's get down to brass tacks.
Time to roll up our sleeves.
How do you actually start building your own dividend portfolio?
Right.
Let's make this practical.
So Sarah really emphasizes research.
Yeah.
She doesn't just throw out a bunch of stock names.
Exactly.
She wants viewers to understand why she chose those particular companies.
Do your homework.
Find investments that align with your goals and risk tolerance.
Because everyone's different.
Right.
What works for one person might not be right for another.
Not a one size fits all situation.
So what are some practical steps for researching dividend paying companies?
What should our listeners be looking for?
Well, there's a ton of information available online and in financial publications.
Yes.
Start with the basics.
Accompanies financial statements.
They're dividend history.
And something called the payout ratio.
Oh yeah.
The payout ratio.
That's important.
It tells you what percentage of a company's earnings they're paying out.
As dividends.
Right.
So if a company's paying out almost all of their earnings as dividends,
that could be a red flag.
Exactly.
You want a sustainable payout ratio.
Which means they can comfortably afford those dividend payments.
And they have room to grow.
Right.
It's not just about chasing the highest yield.
You have to consider the company's overall financial health.
Can they keep those dividend payments coming over time?
Look for companies with a solid track record.
And a business model that can withstand, you know, the ups and downs.
Look for industries with long-term growth potential.
Companies that have a competitive edge.
Those are signs of a healthy business.
The kind that can keep those dividends flowing.
All right.
So let's say we've done our homework.
We've identified some promising companies.
Do we just go all in on one or two?
That's where diversification comes in.
Ah, diversification.
The golden rule.
It's essential whether you're investing in dividend stocks or anything else.
Don't put all your eggs in one basket.
Spread your investments across different industries, different sectors.
So if one sector takes a hit.
Your whole portfolio isn't going down with it.
It's like a safety net for your investments.
Now how do you decide how much to put in each stock?
That's a good question.
It depends on your risk tolerance and your investment goals.
Right. Some people are more comfortable with risk than others.
A general rule of thumb is to allocate a larger portion of your portfolio to well-established companies.
Those blue chip stocks with a long history of dividend payments.
They're typically seen as lower risk.
Then you can allocate smaller amounts to companies with higher growth potential.
Which could also be higher risk.
It's about finding that balance that's right for you.
Your personal comfort level.
All right. So we've built our diversified portfolio.
We're feeling good.
Now what about managing those investments over time?
Do we just set it and forget it?
Not quite.
It's important to monitor your investments.
Keep an eye on things.
How are those companies performing?
Are the dividend payouts consistent?
What's happening in their industries?
You have to stay informed.
Don't be afraid to make adjustments to your portfolio as needed.
Investing is an ongoing process.
Not a one-time event.
And don't forget about reinvesting those dividends.
Oh yeah, that's key.
Sarah's a big believer in the power of compounding.
It can really supercharge your returns over time.
It's like a dividend-generating machine that keeps feeding itself.
I like that analogy.
Yeah.
All right, we've covered a lot of ground in this deep dive.
We've gone from the basics to the nitty-gritty.
What's the most important takeaway for our listeners?
Dividend investing can be a fantastic way to build wealth over the long term.
But you have to have a strategy.
Do your research.
And be patient.
No shortcuts.
It's a journey.
And remember, Sarah's journey started with a single investment.
So don't be intimidated.
Start small. Be consistent.
Let the power of compounding work its magic.
And explore those side hustles.
Boost your income. And fuel your investments.
What skills or passions can you turn into a passive income stream?
That's a great question for our listeners to ponder.
But possibilities are endless.
That's it for this deep dive into dividend stocks.
Thanks for joining us.
Until next time, keep learning, keep investing, and keep diving deep.