The simple maths behind it
The money you need is your yearly income goal divided by the yield. For $500 a month (that is $6,000 a year) at a 4% yield you would need $150,000. At 2% you would need $300,000, and at 6% only $100,000.
That is why a high yield looks so attractive. But a high yield often comes with a higher chance that the payment is cut or that the price falls, which can cost you more than the extra income. Most people who reach an income goal do it with a mix of holdings and years of reinvesting and adding money, not with one high-yield pick.
How to use the planner
- Enter the monthly income you would like.
- Filter out yields you think are too high, or keep only stocks with a long record of raising their dividend.
- Tick a few rows to build an equal-weighted basket and see the money it needs.
- Open the basket in the portfolio calculator to see income, average yield and how much of your costs it could cover.
Remember that the amounts assume today’s yield and price. Both will change, dividends are not guaranteed, and taxes and fees reduce what you keep.