Technically, is it possible to generate so much income from?

Question

dividens that one would never have to work again?

I just wanted to run that by someone because it sounds too good to be true, whats the possible catch ( other than taxes), and why dont I hear more people living off of this?

Aparently, blue-chip stocks dont lose too much value, so they are relativly safe, and they give back some income.

Answer 1

Usually, if you are young you cannot live off your savings, because you probably haven't earned enough to generate sufficient income. So when you are young and hopefully fit you work hard (and smart) in the best job your education will give you. Through wage increases, increasing assets, pension etc. you accumulate enough wealth, so that when you retire you live on the income from your accumulated savings and assets albeit at a reduced level. unless of course you can buck the system through entrepreunerism.

Answer 2

Yes, it's possible.  For the average person, it's not highly probable though.  

You would have to invest millions.

Answer 3

yes it is possible. some CEO's are paid through stocks instead of salary because if they are given an equivilent salary they will be taxed at a higher rate.

Answer 4

You can generate a good income level from dividends, but you should have a good amount of money invested.

You don't hear about people living off of dividends, because there's no glamour in that type of investing.   The stocks don;t take big jumps or drops, but they are steady,

Aparently, blue-chip stocks dont lose too much value, so they are relativly safe, and they give back some income.  This is not really a true statement, just like the market they do go up and down, but they have a better chance of recovery in the long term,

There are other security investments that provide very good returns and have been doing so for years.,   You should look into MLP - master limited partnership,   You can read about them on http://moneycentral.msn.com/home.asp

Here are some websites that may be of some interest to you

http://www.zacks.com/

http://screen.morningstar.com/StockResul...

http://www.grahaminvestor.com/

http://www.dividenddetective.com/

Answer 5

Of course it is if you have a large enough portfolio.  There are quite a few investment grade stocks that pay above 4% dividend.  If you are not all that particular about blue chip stocks you can even generate a higher dividend income.  

But let us say that you need $70,000 a year to live off of.  Then you will require a portfolio of $1,750,000.  That is quite doable if you begin investing in an IRA account early enough.

$5000 invested annually at an 8% annual return will yield that in less than 45 years.  Some people with IRA accounts have yielded much better than 8% annually.

Answer 6

Well, people live off of interest in their bank CDs all the time, and yes, I've known some that live off of their dividends.

Part of the problem is that they fell out of fashion several years ago. Not every company can afford to share their profits directly with their owners, which is what dividends are. Sometimes it is because they have so little profit, or that it is so rare that there is enough to pay AND reinvest in new technology or expanded plant, etc. Sometimes non-dividend payers see no need, or perhaps they are paying out so much for their burden of debt they feel, again, like they can ill afford to part with their meager profits.

Part of the problem, also is that dividends (except in preferred stock and the like) are not fixed. You can't count on them in the same contractual way that the banks and insurance companies can. (Although Farmers Insurance was promising a "guaranteed" rate of 4 percent several years ago when interest rates were dismally low, so after my father died my mother discovered that they were paying less than the "guaranteed" amount, when she called they essentially said 'take it or leave it', so she found someplace else to put it. Fairly, I expect Farmers was not the only one fudging on promises back then).

A couple of years ago, I assembled a list of solid dividend paying preferred stocks and trusts. I put it in a trial portfolio to see what would happen, checking my method before putting my money into it for real. Well, I didn't put money into it because the test portfolio was losing money badly. Sure, the dividends were rolling in, some better than bank rates, some quite a bit better. But what was also happening is that the market value of those shares was dropping faster than the income stream from the dividends coming in. Much of that has since changed course and recovered, but some have also turned around again and sunk.

The blue chip's don't lose too much value, but then they don't grow with as much value either. Consider the amount of profits they generate and compare that to the price to earnings ratio (P/E), you will find that the market treats these cash cows like illegitimate stepkids sometimes.

Part of the matter is very much like guessing interest rate trends and buying bonds. If the interest rates fall, then the principle will rise (interest payments remain static), so your value increases, but the yield on that value diminishes. When interest rates rise, then the principle will fall in market value. Your yield increases, but the market value of the holdings tanks.

So can you do what you want? Yep, definitely, but it will mean that you need a lot more money to risk, and you will have to watch the interest rates and general economy like a hawk. If you happen to have to sell out some of your position (hospital bills perhaps) then there is a chance you will get too little from your investment to please you.

Relatively speaking, in the long run, your strategy will work just fine. But in the long run, as one famous economist observed, "we are all dead."

Answer 7

Sure you can.  A lot of people do.  They're just not very visible.  Read "The Millionaire Next Door".

The catch is that you have to defer the enjoyment of your money, which is hard to do for most people.  If someone started saving early, it wouldn't take much each month to add up to a million dollars and 5% on a million dollars is 50000.  Kick back and relax.

Answer 8

Yes, thats pretty much the holy grail of investing you wouldnt really worry about anything if you can live off the dividends off of GE or some other bluechip. And its as simple as buying the stock. Only catch you need to buy  a lot of stock, most likely 1-2 million min. Thats the hard part.

Answer 9

You would have to find stocks with like $ 30,000 worth of dividends each year. Good luck.

Answer 10

Most stocks pay two or three percent a year in dividends.  The average yield on the S&P 500 is 2.26 percent right now.  Any higher than that would increase risk.  High yield usually means high risk in equities.  So you can figure out how much you would need to live off of it.  You would most likely need some capital appreciation to live off of a stock portfolio.  Bonds pay a higher yield with less risk.  The Lehman Aggregate bond index has a yield of 5.14 right now.