The Math: How Much Do You Need?
To generate $25/month ($300/year) in dividend income, you need to work backwards from your target yield.
Simple Calculation
With a 6% yielding asset like SCHD, you need $5,000 invested to generate $25/month in dividends.
If you can find safe assets yielding 8% (still conservative), you only need $3,750. But remember: yield is not the goal, sustainability is.
Where to Start: Your First Two Assets
Option 1: Ultra-Safe Foundation (SGOV)
SGOV (iShares 0-3 Month Treasury Bond ETF) is a Tier 1 Cornerstone asset. It invests in ultra-short-term U.S. government bonds.
- Yield: ~5.2% (fluctuates with Fed rates)
- Risk: Near-zero (backed by U.S. government)
- Payment frequency: Monthly
- Volatility: Minimal price fluctuation
If you invest $5,000 in SGOV at 5.2% yield, you will receive approximately $21.67/month. Not quite $25, but you have zero risk of principal loss.
Option 2: Dividend Growth Start (SCHD)
SCHD (Schwab U.S. Dividend Equity ETF) is a Tier 2 Foundation asset. It holds high-quality U.S. companies with consistent dividend growth.
- Yield: ~3.5-4%
- Risk: Low (diversified, quality companies)
- Payment frequency: Quarterly
- Growth potential: Dividends increase over time
With SCHD's 3.5% yield, you would need approximately $8,571 to generate $25/month. Higher capital requirement, but you get dividend growth and potential price appreciation.
The Hybrid Approach (Recommended)
Split your $5,000 between SGOV ($2,500) and SCHD ($2,500):
• SGOV generates ~$11/month immediately
• SCHD generates ~$7/month, growing over time
• Total: ~$18/month to start
Add another $2,000 over the next 3 months to hit $25/month. You now have a balanced foundation: safety (SGOV) + growth (SCHD).
Key Concepts You Must Understand
1. Ex-Dividend Date vs Payment Date
When you buy a dividend stock, you must own it before the ex-dividend date to qualify for the next payment.
- Ex-Date: The cutoff date. Buy before this to get the dividend.
- Payment Date: When cash hits your account (typically 2-3 weeks after ex-date).
Example: SCHD has an ex-date of March 25. You must buy by March 24 to receive the dividend paid on March 28.
2. Monthly vs Quarterly Payments
Monthly payers (SGOV, JEPI) distribute 12 times per year. Quarterly payers (SCHD, most stocks) distribute 4 times per year.
To get consistent monthly income, you can either:
• Buy monthly-paying ETFs (easier)
• Build a "dividend calendar" with quarterly payers spread across different months (more advanced)
3. Reinvestment vs Cash Distribution
When dividends arrive, you have two choices:
- Take cash: Money goes to your brokerage account as cash (use for expenses, save, or manually reinvest)
- DRIP (Dividend Reinvestment Plan): Automatic reinvestment into more shares
At the $25/month level, most investors should reinvest to accelerate growth. We'll cover when to switch to cash distributions in Module 3.
Your Action Plan
Open a Brokerage Account
Choose a platform with zero-commission trading: Fidelity, Charles Schwab, or Robinhood. Most accounts open in 10 minutes.
Fund Your Account
Link your bank account and transfer $3,000-$5,000. Most brokers process transfers in 1-3 business days.
Buy Your First Shares
Search for "SGOV" or "SCHD" and place a market order. Start with $2,500 in one (or split between both).
Enable DRIP
In your brokerage settings, enable automatic dividend reinvestment for your holdings. This compounds your growth.
Wait for Your First Payment
Check the next ex-dividend date. If you bought before it, your first dividend will arrive within 2-4 weeks. Check your account activity.
What Success Looks Like
After 30-60 days, you should see:
- First dividend payment received (check your brokerage activity)
- Shares automatically increased (if DRIP is enabled)
- Clear understanding of ex-dates and payment schedules
- Comfort with your platform and ready to scale
Congratulations. You are now a dividend investor. You own income-generating assets that pay you every month or quarter, regardless of market conditions.