This $1.7 Million Portfolio Pays More Than a Member of Congress

A rank-and-file subordinate of Congress earns $174,000 per year. A dividend portfolio tin make the aforesaid level of income without a campaign, constituents, oregon a play commute to Washington. Unlike a salary, however, this income is tied to capital, which means the size of the portfolio matters acold much than the rubric attached to the paycheck.

The mathematics is straightforward. Divide the income people by the portfolio yield, and you get astatine the superior required to nutrient it. Replacing a legislature wage is comparatively casual connected paper. The much important questions impact the tradeoffs: however overmuch hazard you are consenting to take, however reliable you request the income to be, and whether that income is apt to turn implicit time.

Slow and Steady: The 3% to 4% Lane

At a 3% yield, replacing the legislature paycheck requires astir $5.8 million. At 4%, the fig drops to astir $4.35 million. This is the territory of dividend aristocrats and wide dividend ETFs.

Johnson & Johnson (NYSE:JNJ) yields 2.3% with 64 consecutive years of increases, astir precocious raising the quarterly payout to $1.34. Procter & Gamble (NYSE:PG) yields 3% and has paid a dividend each twelvemonth since 1890. The Schwab U.S. Dividend Equity ETF (NYSEARCA:SCHD) packages a handbasket of akin names astatine a 0.06% disbursal ratio, with apical holdings including Bristol-Myers Squibb, Merck, and Chevron.

The tradeoff is straightforward. You request the astir capital, but the income watercourse grows. JNJ's quarterly dividend has climbed from $0.49 successful 2010 to $1.34 today. That is the compounding that defeats inflation.

Where REITs Earn Their Keep: 5% to 7%

Capital requirements driblet hard here. A 5% output needs astir $3.48 million; a 7% output needs astir $2.49 million. This is REIT and high-dividend equity territory.