What should I do if I want to earn £100 a month from fractional shares?

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Work, work, work. Whether you enjoy working out or not, the idea of ​​spending several hours each week working out is often appealing. But what appeals to many people, including me, is the idea of ​​making a little extra money every month. That’s why one of the passive income ideas I use is investing in dividend stocks.

I had a specific target in mind for the income I wanted to try and achieve each month, say £100. Although I have never invested in the stock market before, here are the steps I take to do so by buying dividend stocks.

Step one: Prepare to buy shares

I have to buy shares to get dividends. But before I do that, I need to do some housekeeping to get ready for business.

So, for example, I set up a Stocks Distribution Account or Stocks and Shares ISA. That way, if I have money and know what kind of dividend I want to buy, I’ll be ready to take action.

Step Two: Set a monthly passive income goal

Different companies pay their dividends according to their own schedules. Some pay only informally or not at all. After all, dividends are never guaranteed.

So while I can typically target stocks that pay off in a few months, I find it easier to target Average £100 per month instead of the same amount every month. This adds up to £1,200 over a year.

The future income from the shares depends on what is known as their dividend yield. That’s basically the annual dividend I should receive as a percentage of the price I pay for the shares. If I invest in stocks with an average yield of 5%, I would need to invest £24,000 to hit my target. If the average yield doubles by 10%, I only need to invest half – £12,000.

Step three: Choosing the right dividend for me

So does that mean I should just go for high yielding stocks?

Absolutely without further ado! Buying a share is like buying a small piece of a larger company. Bp Or Apple. Dividends of 3.9% and 0.6% for the two companies respectively do not tell me anything about the business itself.

Following the thinking of billionaire investor Warren Buffett, I adopt the mindset of an investor buying a small business. So I’m looking for a business environment that I understand and expect to see strong customer demand in the future. Then I try to find companies that are competitive in that industry. I also check to see if they have significant debt or other spending obligations that prevent them from using it to pay dividends.

Step Four: Start shopping and earning

If such dividend stocks are available to me at attractive prices, I can start building my income generating portfolio.

As with dividends, however, the company’s promises are never guaranteed. So I try to reduce my risk by investing in various dividend stocks.

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