How to Live off Dividends? How to Grow Your Dividend Income?

How to Live off Dividends?: Everyone who enters the stock market wants to make money from the investment. Now first you have to understand what are methods to make money from the stock market.

1 Capital appreciation or capital gain.

2. Money from dividends.

Capital appreciation is buying shares at low prices and selling them to high prices. Simply difference between purchase and selling price is Capital appreciation (Profit). If you are new to the market you can read how to make money by capital appreciation here.

First tell me it is possible to live off Dividends?

Simple and Short answer is Yes

Now your next question will be How to Live off Dividends?

First, we will Understand “What is Dividend?”

The dividend is simply the distribution of companies earnings to a class of shareholders, as decided by the Board of directors of the company. A portion of the remaining profit of the company is distributed to the shareholders in the form of dividends. The dividend may be payable in the form of cash, cash equivalent, shares, etc.


I have 1000 Rs and I buy 2 shares of Xyz company for 500 Rs each. Over the span of time share-price become 550. Then Xyz company decided to give a dividend yield of 5%. Then the inverter will get a 27.5 Rs dividend per share. Total 27.5*2=55 Rs.

This 5% dividend yield is only for example. Dividend yield depends upon company board members, company performance, and strategy. In that way, dividend yield can be fixed or adjustable.

Why invest in Dividend Stocks?

  • If you get dividends from your invested stock then you can reinvest it and create more wealth.
  • You can continue your capital gain without selling actual stocks.
  • Most of the dividend stocks are blue-chip stocks, if the economy goes down or a recession occurs then also you can generate dividend income at that bad time also.
  • You can start a new business by using dividend income.
  • Dividends can help to pay household bills.
  • You can pay for travel and charity and more

How to Choose the best investment option for high return: Beginners Guide

How to Live off Dividends?

In that way more you invest in quality dividend stocks more you will financial freedom. Most successful investor Warren Buffett is also the biggest fan of dividend stocks. They personally invest in this type of stock.

I personally like to invest in dividend stocks investment because dividend income directly comes to our bank account, they are highly liquid. We don’t need to sell your current assets to get that money and we not stopping our process of compounding.

How to choose stocks for Dividend income?

A) Choose a well-established company

Always choose a well-established company. If possible choose only a blue-chip company. This company should have a stable business. The company should be continuously profit-making year by year. The company should be less capital intensive.

B) Sustainability

The demand for products of that company should be consistently increasing. If In the future demand for that product increases then companies will sustainably grow their profit and revenue. And company able to give dividends constantly.

C) Growing Dividends

If any dividend giving company contently increasing its dividend then we simply predict that the company can give a nice dividend in the future. If the company potentially sustains its demand in the future then it is a good sign to invest in that company.

D) Avoid penny stocks or risky stocks

Information related to penny stock companies is limited on the internet and other sources. So it is hard to analyze particular penny stock. If you are perfectly able to analyze penny stock then you can invest in it. But if you are a newbie then it is good to stay away from it. Also, stay away from PSU Stocks. Because their goals are somehow different, they work from the development of public service mainly.

Dividend increase over the span of time.

Heading telling itself that dividends of fundamentally strong companies increase over the span of time. For example, if any strong fundamental company gives 10 Rs dividend this year and its profit increase in next year then that company gives more dividend next year.

I hope you understand how to make dividend income. Have great day. Happy Investing!

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Yadav Patle

Hello, I am Yadav Patle. Civil Engineer by education. Stock market investor. I can guide you to start investing in a very simple language. Want to know more click here.

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