YouTube Transcript:
Beginner's Dividend Portfolio Building Masterclass: How To Build A $40K Dividend-Paying Portfolio

hey everyone it's Steve again and in
today's video I'm going to do a
stepbystep tutorial on how to build a
$40,000 dividend paying portfolio by the
time you retire now I want to preface by
saying that this $440,000 worth of
dividends it's going to be relative
right it's going to depend on how much
money you invest or contribute on a
monthly basis and what kind of dividend
paying assets you buy every month I also
want to say that this is going to be a
complete beginners tutorial it's going
to cover the three steps of what when
and where so what we're going to buy
when we buy these shares and where we're
going to place these dividends back into
maybe our portfolio or maybe we can take
it out as income I'm also going to talk
about the number one mistake that I
believe that most beginners make when
they start building their dividend
paying portfolio and something that I
did too so this way you guys don't have
to make the same mistake all right so
without further Ado let's get started I
also want to say thank you for everyone
who voted on me making this video on
Instagram I actually put this poll up
today asking you guys what kind of video
you wanted me to make so I guess all of
you voted for a and this is why I'm
making this video okay so just real
quick for those of you who may not want
to watch this video until the very end
I'll just kind of tell you what the
three steps are to build this dividend
paying portfolio and it's basically what
you you see on the screen number one
you're going to buy dividend paying
assets I'm going to talk about the
different assets like ETFs versus
companies and what I usually like to do
I like to do a combination of both
number two it's to use the DCA method or
the dollar cost averaging method again I
like to keep things as simple as
possible I I don't like to time the
markets or anything I like to just kind
of slowly scale my positions slowly
build my portfolio over time and step
number three we're going to talk about
about where to put this money and
there's really three different options
drip versus self reinvestments versus us
taking out the money as our income and
of course lastly I'm going to talk about
that number one beginner's mistake that
pretty much everyone really makes okay
including myself I made this mistake too
all right so let's just talk about the
basics here um what are dividends and
why does it really matter so for those
of you who just got started in the
investing world you just started
investing in you open up your Roth IRA
basically when you invest in companies
or some companies that pay some sort of
dividend essentially when you have these
shares in your portfolio every quarter
or so these companies will give you a
couple of cents or a couple of dollars
uh depending on how many shares you hold
so I know there are some companies out
there that will pay you maybe 50 cents
per share that you own or maybe a dollar
per share or $2 per share and then this
is a really cool Strate strategy that a
lot of investors like to do where they
build this dividend paying portfolio and
income just comes in every quarter or
every month depending on what it is that
you buy and this is very analogous to us
owning property like a house because if
you take a look on the left hand side
you can say that you buy a house for
$500,000 and you collect rental income
for
$11,500 a month same thing with dividend
paying stocks when you buy shares that
pay some sort of dividend you can say
buy $500,000 worth of shares and every
month or so or every quarter right you
get paid $1,500 a month so it's very
very similar right now let's talk about
the steps of buying dividend paying
assets so there are two different assets
that you can really buy and the ones
that I usually like to buy are ETFs and
individual companies and again you want
to see which one fits your portfolio and
whatever you're comfortable with doing
okay so number one you can buy ETFs or
exchange traded funds on this channel I
talked about ETFs or I talk about ETFs
all the time so basically it's like a
basket of stocks whenever you buy one
share of an ETF you're buying a whole
bunch of companies all at once so you
buy one share of an ETF you might own a
little bit of Walmart Costco Visa Apple
go Google right so these are what ETFs
are so if you want to buy ETFs there are
some pros and cons right it is going to
be more on the stable side because
you're basically buying an amalgam an
average of all of these companies and
you collect the dividends or the average
of all of these dividend payouts and
you're able to diversify yourself but
with ETFs it's more on the boring side
because of the averages that you are
kind of buying into there's not going to
be that much growth right if one company
really explodes up within the basket of
stocks it's not like your entire
portfolio is going to go up right
because you're buying the entire average
only one part of the entire basket is
really going up hopefully that makes
sense now if you want to say buy
individual companies you're very bullish
on one particular company like maybe
Costco or Walmart or Visa or McDonald's
or Coca-Cola then yeah you can buy these
individual companies it is going to be
more on the volatile side so you want to
see what your risk tolerance is but
there is higher potential growth here
and also if you do these research you do
research on these companies on a
quarterly basis you take a look at the
earnings call you look at the earnings
report and you go oh I really like this
one specific company because not only
are they growing in value they're also
increasing their dividend payout too so
I'm going to talk a little bit more
about this in a little bit so let's take
a look at one of my favorite ETFs
dividend paying ETFs SD so this is from
Charles Schwab and this is the ticker
symbol S CHD and currently one share of
this ETF is around $79 80 and my whole
goal for this video and really this
whole channel is to promote autonomy I
want you guys to learn how to invest
yourself so that one day you don't need
me anymore you don't need a financial
adviser you can kind of do this by
yourself and your own research so right
now I'm on Yahoo finance which you can
totally go onto yourself right you can
type in the ticker symbol of whatever
company that you want to research and
you can take a look at the summary and
you can see kind of like the chart on
how well the ETF or stock has done over
the past several years if you take a
look at the leftand side here you can
see what this particular ETF holds right
like the companies that are within this
ETF so if you click on Holdings you can
see the top 10 companies that make up
this ETF so you can see that there's
Texas instrument Chevron Lo Martin Pepsi
Coca-Cola Verizon right fizer Cisco and
again when you buy these ETFs you want
to see hey are you comfortable with
these companies do you believe in these
companies and if the answer is yes then
this ETF is most likely going to be for
you right now if you go down a little
bit more to the performance section you
can see some of the data some of the
returns that the ETF has made over the
past several years so if I zoom in you
can see that over the last month or so
the ETF didn't do so well because we did
have a little bit of a pullback it was
NE
4.64% but remember folks when we are
investing we're not going to focus on
the short term we're looking at that
long-term view right 5 10 20 30 years or
so we take a look at a 3 months 1.68 but
if you look all the way down to the
10year average you can see that SCD gave
around a
10.9% average annual return which is
slightly less than the S&P 500 which is
currently around 12% right now and on
the right hand side you can see how well
it's done on a year-to-year basis now
whenever I talk about average annual
returns and I say okay it's around 10%
people will assume that every year the
stock or the ETF will grow 10% this is
not true okay everyone so it's an
average of all the last 10 20 30 years
right so you're adding all of the
increases right and dividing it by
however many years there are we're
finding the average so you can see that
in
2023 we had a growth of
4.57% 2022 we had a bare Market we went
down
3.23% and just to kind of plug this in
here
with dividend paying companies they are
typically not always a little bit more
on the safer side compared to other
companies that don't pay a dividend
usually when there is uncertainty in the
markets maybe there's some sort of
geopolitical Events maybe there's an
election coming up just any uncertainty
at all the stock market will sometimes
get a little bit shaky and a lot of
these institutions Wall Street investors
they will sell their shares to kind of
protect themselves and their clients and
guess what the stocks that they usually
sell the fastest or the most are the
companies that don't pay a dividend
usually not always okay and the
companies that they still keep within
their portfolio are the ones that pay a
dividend why is this it's because even
if there is a selloff the stock market
goes down they still get paid dividends
from these companies that pay a dividend
these other companies that don't pay a
dividend well a lot of these
institutions don't have a high incentive
of holding on to them in their
portfolios right so this is why back in
20122 when we had our bare Market it
only dropped around
3.23% compared to the S&P 500 which it
dropped way way more right and if you
compare it to technology companies it
dropped even further so I like to keep a
balance of S&P 500 funds a little bit of
technology companies and these dividend
paying companies in particular from the
Dow 30 right in my portfolio to keep a
well balanced portfolio in 2021 we had a
29 30% return and you can see the rest
here all the way to 2016 all right so
let's go back to the summary on Yahoo
finance when you click on that you're
going to see this thing called the yield
or the dividend yield and this is going
to tell us how much money we get per
share so you can do this by yourself
when you go research on Yahoo finance
currently Ford you can get a
3.47% dividend yield so what does that
translate to you can get this number
right here and then you can multiply it
by the price of a share of shd which is
around $79 80
3.47% times $79 or $80 that's going to
be around
$2.75 per share I know some of you guys
are going to be like
$2.75 that's such little money I buy one
share and I only get2 $3 I understand
because from a beginner's investor
perspective we think a lot of times that
we just need to buy one or two or three
shares or just contribute and invest
$500 once and we think that that money
is going to turn into a million dollars
later on this is very far from the truth
folks remember with wealth building it
takes time for our portfolios to
compound over time time and it takes a
lot of discipline a lot of consistency
we need to make sure that we contribute
money and we buy shares in our portfolio
every two weeks every month or so even
though I'm A Millionaire right now and I
have a $1 million portfolio I'm still
buying shares right I'm still in that
wealth building mode and I'm still doing
this I'm still practicing these wealth
habits here this is a wealth habit that
every wealthy person has they still
invest and they still want to grow their
wealth right they want to compound their
portfolio and I'm going to talk about
compounding growth in a little bit so
thinking long term one share is
$2.75 right I know but what if we had 10
shares that's going to be around
$27.50 worth of dividend 100 shares is
going to be
$275 and if you go all the way to 10,000
shares that's going to be around
$20,000 worth of dividends right it
makes sense and again I know that some
of you guys are are going to go oh like
is it really possible for me to grow my
portfolio to 10,000 shares yes because
again I'm going to show you the compound
interest growth in a little bit here
okay folks so keep an open mind here
keep it positive mindset because I know
a lot of this we weren't taught this in
school or from our parents so this
investing World buying things that are
going to grow over a time it sounds
strange it sounds scary but just keep an
open mind all right okay so here's the
thing I know when you think about oh
$20,000 worth of dividends is that a lot
of money well remember this is a
beginner's video I'm trying to keep a
lot of these variables static I'm not
talking about stock splits or maybe
dividend growth but I'm going to kind of
touch upon dividend growth right now all
right so let's take a look at this this
is Coca-Cola right now one share of
Coca-Cola is around
6263 and it currently pays around4
849 per share if you want to take a look
at the dividend history of any stock or
ETF you can go on to this website called
nasdaq.com and type in the ticker symbol
right for Coca-Cola it's KO if you want
to type in SD you can also do that too
and it's going to show you all the
dividend payouts over the last several
years so again right now it pays around
49 cents per share but if you look all
the way down to 2023 all the way back to
2022 the dividend was 46 cents per share
44 cents per share let's go back in
history even more back in 2022 it was 44
cents per share in 2021 2020 it was 4241
cents if you keep going back you'll see
that Coca-Cola used to pay like 15 cents
per share 12 cents per share right so
you can see that dividends can increase
over time which means that what well
this $20,000 worth of dividends may not
be $20,000 later on it's most likely
going to be more maybe $30,000 or
$40,000 right and just to kind of keep
things simple not to talk about stock
splits or ETF splits or anything like
that right this is around an $800,000
investment right because 80 per share
right $80 per share times 10,000 shares
that's
$800,000 and again I know some of you
are going to say is it really possible
to have an $800,000 portfolio yes it is
we're going to do the math in a little
bit okay so hang on tight okay so I'm
going to go to this compound interest
calculator that you mostly like most
likely have seen in a lot of my shorts I
use this calculator all the time it's
from investor.gov you can write this
down right now and go check it out
yourself later on and let's plug in some
numbers okay we're going to make some
numbers nice and round so we can make
the math a little bit simpler so let's
say that we have an initial investment
of $0 because we're all beginners here
we're just starting out our journey to
Financial Freedom and then we're going
to contribute $500 a month and then
we're going to make sure that we have a
long time period so this way we are able
to compound our portfolios and I'll talk
about why in a little bit we're going to
say that we're going to invest for the
next 40 years and we're going to get an
estimated interest rate of 10% because
that's what SCD gave us for the last 10
years or so all right and again we're
keeping numbers very simple here well
guess what in 40 years or so with
Average stock market return returns
you're going to have a portfolio of
around
$2.6 million $2.6 million so some of you
who ask me right now hey is it possible
to have an
$800,000 portfolio yeah you can totally
grow your portfolio to $2.6 million
right of course you have to have a lot
of discipline and you need to make sure
that you're contributing money into your
accounts on a regular basis and
investing your dollar cost averaging
which again I'll also talk about in a
little bit but take a look at this box
right here and let's zoom in because
this is really cool because if you take
a look at the total contributions that
you actually put in yourself you really
just put in
$240,000 of your own money and that
money grew to $2.6 million that
basically just 10x your initial
investment
10x pretty crazy right so when we invest
in these dividend paying company
dividend paying ETFs we want to take a
look at really two things one we want to
make sure that the asset itself is
growing in value right so the
$240,000 here grew to $2.6 Million
number two we want to make sure that the
Dividends are also growing too so
instead of us getting paid like 15 cents
per share it slowly grows to 20 cents
per share 25 cents 30 cents per share we
want to make sure that both variables
are growing over time and this is going
to kind of lead into the number one
beginner's mistake that a lot of people
make which I'll talk about in a little
bit so let's kind of think about real
estate terms here okay so remember if
you were to say buy a home for $500,000
you're getting that rental income of
$1,500 a month and we're going to say
that this is 2024 later on in 40 years
that home I know this sounds kind of
outrageous to think about to believe but
that home can be around $2.6 million
like in California you see home prices
skyrocketing really fast right so this
is this is basically the investing World
folks you can look at homes from 10 20
30 40 years ago take a look at the home
prices you're going to be amazed at how
much all of this all of these assets
have grown over time which again goes
down to the point of becoming wealthy is
not us saving money we need to make sure
that we buy assets that grow over time
we need to collect assets stocks real
estates right and if you take a look at
that rental income instead of just
getting paid $1,500 a month it's going
to grow folks okay rent is going to go
up no matter if we like it or not it's
going to be around like
$7,500 a month maybe even $10,000 a
month all right as unfortunate as it is
all right okay so hopefully everyone's
getting a lot of value here if if you're
taking in notes right now good job give
yourself a pat on the back let's talk
about step number two this is going to
be the when when do we buy shares well
we're going to use the DCA method or the
dollar cost averaging method so
basically you need to First make sure
that you set up recurring deposits right
you can say put in $800 a month right
$500 a month whatever you are
comfortable with okay and if you're
someone who says Steve I don't have
money to invest right now it's okay
let's go back to wealth pillars numbers
one and two we're going to make sure
that we have a budget we really make a
budgeting sheet right on Excel or you
can use my budgeting sheet I'll put a
link down below if you want to download
that or you can download a budgeting app
whatever works for you and then wealth
pillar number two you need to make sure
that you're constantly increasing your
skills so this way you can increase your
income right you want to make sure that
you're getting that pay raise that
promotion makes sense so this way then
you can increase your contributions when
you start investing all right number two
you want to buy shares each month no
matter what the price is we're going to
buy shares no matter where it is okay
even if we have a stock market crash
we're going to still buy a little bit of
shares every month at the beginning of
every month right even when the stock
market goes up we're still going and buy
some shares all right we need to make
sure that we are disciplined in
contributing money and we're just slowly
building our position over time because
again this is what all wealthy people do
and it's okay for you guys to start off
slow right start off small even with you
just maybe putting $20 a month or $80 a
month that's okay because you want to
get your feet wet right and if you're
doing that like you should be very proud
of yourselves and even if you're just
putting $20 a month we're going to
slowly baby step our way upwards right
take baby steps we can then maybe
deposit $100 a month or maybe U $200 a
month or maybe $300 a month all the way
to $0000 a month but you want to do
something that you can do consistently
and that is very attainable for you all
right okay so how do we actually do this
because I like to show you guys
actionable steps right so I'm on
Fidelity right now this is just a
screenshot when you sign in and yes you
can do this with other brokerages like
Vanguard Schwab or eade whatever you're
comfortable with but I use Fidelity and
Schwab you can go to the transfer button
right here we're going to set up
recurring deposits right we need to put
in money so remember we're not just
going to put in money once this is not a
casino here where we put money and we
think it's going to grow to a million
dollars no we are going to make sure
that we put we set up recurring deposits
so we're going to click on the recurring
deposit toggle set the frequency to
monthly if you're someone who likes to
do it bi-weekly you can totally do that
too whatever you like and then you're
going to put an amount that you feel
you're most comfortable with by setting
this up this recurring deposit I promise
you it's going to hurt less you don't
want to think about it folks if you
automate things it will make your life
easier it will make your investing
Journey much much easier there's going
to be less friction okay I promise you
this this is what all my members do this
is what a lot of my followers do all
right okay once you set up your
recurring deposits you're then going to
go back to the original dashboard and
then you're going to click on this
magnifying glass this is going to be the
quote button and then you can type in
your ticker symbol I'm going to say I'm
going to type in SD right which is a
ticker symbol for the Charles Schwab
dividend paying ETF I'm going to then
set my action to buy I'm going to buy
however many shares I am allowed to with
the money that I contribute inside so I
put in $800 right I'm going to buy say
10 shares and then I'm going to make
sure that the order type is Market I
know some of you in here are going to
say Market order shouldn't you use limit
order or maybe trailing stop order or
you know we're going to keep things
simple here okay this is a beginner's
video time and day this is going to time
and for this is going to be day click on
preview order and then you can submit
you have basically 10 shares and you're
going to repeat this pattern every
single month okay every month all right
so let's talk about step number three
you're almost there hang on tight folks
you guys are doing great step number
three let's talk about the where where
where do we put this money once we
collect the dividends right every
quarter or so we're going to collect
these dividends they're going to come
into our accounts automatically we don't
need to do anything at all this is what
all wealthy people do remember they just
collect dividends there are three things
that you can do first you can use drip
which is a dividend reinvestment plan
you can turn this on within your
brokerage there's a little check mark
and then something that you can like
read right you can accept it once you
turn it on basically you're going to
automatically reinvest back into the
same thing so for example if you invest
in SD you turn on drip that dividend
that comes in every quarter or so maybe
you get like $2 or $300 or $500 from
these dividends that money will
automatically be reinvested back into
SCD same thing with Coca-Cola that
dividend that you get from Coca-Cola
will be reinvested back into Coca-Cola
the same thing so you can turn this on
so this way you can automate things now
if you say I don't want to do this it's
okay you can do self- reinvestments when
that money dividends go goes into your
brokerage account you can let it sit
there as cash and then you can choose
yourself where you want to reallocate
your money into so for me personally I
like to collect these dividends from
Costco from Walmart SCD and then I'll
use those dividends to reinvest back
into S&P 500 funds me for example I like
to reinvest into spy but I know a lot of
you a lot of my members they invest in
FX vo any of these S&P 500 index funds
all right step number three you can also
consider taking out your dividends and
using it as income and this is something
that even Warren Buffett does right he
doesn't work he basically has a huge
portfolio and dividends just come in and
he just lives off of his dividends right
it makes sense it's because he planted
all his acorns in the beginning of his
life and grew it to huge Oak trees later
on now that he's just just sitting there
on a lawn chair on the beach or
something sipping on his Coca-Cola just
collecting dividends right so I hope
everyone is able to do that one day by
the time you guys retire so yes you can
take out your money as income too
because this is real money it's very
similar to the interest that you get
from a high yield savings account and by
the way if you don't have a high yield
savings account you should totally open
one up right now because of the high
interest environment we're in I'll leave
some links down below if you want to use
my links so this way you can help
support my channel and you will probably
get some sort of signup bonus too so
just putting it out there all right okay
so these are the three steps on how to
build a dividend paying portfolio here
is the number one mistake and I really
hope you guys are paying attention here
please do not just invest in something
just because of the high dividend yield
this is a mistake that I made a lot of
my followers a lot of my friends also
made this mistake in the in their
beginning journey of investing so I'm
going to talk about why in a little bit
we're going to do some math here all
right and it's very important that you
consider the overall growth of the
company right don't just focus on the
high dividend yields and of course like
what I said before invest in whatever
you are comfortable with right don't
just invest in something because I
invest in it right someone else invest
in it invest in something that you kind
of did your research on that you believe
in with you know what whatever the
company is doing
okay so let's talk about an example
here this is AT&T this company AT&T it's
around $17 per share right now and if
you look at AT&T like it looks like a
pretty good stock because if you look at
the dividend yield it's
6.49% that's really high because a lot
of ETFs like the S&P 500 it only gives
you like 1.4 1.5% currently right now
shd gives you around 3 something per.
but if you take a look at AT&T it's
6.49% that's really high relative to
these other companies and ETFs right so
you might think as a beginner like oh I
should totally invest in AT&T right no
don't do this why is this because if you
take a look at the long-term trend of
AT&T maybe the five-year Trend take look
at where the stock was 5 years ago it
was around $30 per share where is it now
it's almost around like half right like
176 $15 right now it lost a lot of value
so what is the lesson here yes you will
get this higher dividend payout every
quarter or so but you need to make sure
that the company that you're buying is
also growing too it doesn't make sense
for you to buy a home for $500,000 and
you're getting that maybe $2,000 of
rental income but the home itself is
really bad right like the foundation
isn't good the windows are are breaking
it's in a bad U City right it doesn't
make sense for you to buy a home that is
not very good and is going to depreciate
in value it goes from $500,000 to maybe
$400,000 to
$250,000 no this is why I say when you
buy these dividend paying companies ETFs
you want to make sure that you focus on
two things the overall growth of the
actual asset itself right the house or
the stock it's going upwards and you
want to make sure that the dividend is
also going up too both should go up okay
folks all right so let's do a recap
because this is the teacher and me okay
how do we build a dividend paying
portfolio Three Steps step number one we
need to buy dividend paying assets right
this is the what you can buy ETFs and
companies right buy whatever you're most
comfortable with number two you need to
make sure that you use the DCA method
set up your recurring deposits and
you're going to buy a couple of shares
every month right this is a good wealth
habit that every wealthy person has step
number three you can then talk about the
think about the where where do I want to
put this money after I get my dividends
so you can use a drip method you can
self- reinvest or you can just take it
out as income especially if if you have
a taxable brokerage account right and
please do not just focus on the dividend
yield okay so you want to make sure that
both the asset itself and the Dividends
are growing all right okay and yeah
that's pretty much it for this video
hopefully you guys found a lot of value
I worked really hard for this entire
presentation so I really hope that you
guys learned something if you found
value you can help support me by just
giving me a like or maybe giving me a
follow and also let me know in the
comments if you have any questions at
all because yeah I know as a beginner
it's very scary to start buying things
in your portfolio it's kind of scary to
get into the stock market so there are
no stupid questions or anything like
that I'm going to try my best to answer
all your questions down below and also
again if you want to help support me you
can also use any of my affiliate links
down below it doesn't cost you anything
extra it just gives me a little bit of a
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you're someone who wants to open up a
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can totally check those out all right
okay and that's pretty much it folks um
I hope you guys learned a lot and
hopefully I will see you guys all in the
next video bye everyone