Here's How Many Shares of VOO You'd Need for $500 in Monthly Dividends
Key Points
The Vanguard S&P 500 ETF (VOO) is one of the best funds available for generating long-term wealth.
But its total returns these days have been coming largely from capital growth, not dividends.
Still, you can capture that long-term growth potential and generate a passive income stream.
The Vanguard S&P 500 ETF (NYSEMKT: VOO) has become a $1 trillion fund on the back of the "Magnificent Seven" stocks and the artificial intelligence (AI) revolution. Not only is it an ideal core portfolio holding, but its tech-heavy sector concentration has also made it an elite performer.
Most people use the Vanguard S&P 500 ETF as a long-term growth vehicle, which is what it's best suited for. But it can also be used as an income generator. Given its current yield of just 1%, income isn't its primary return delivery mechanism. But with the right number of shares, you can still produce hundreds of dollars of monthly income.
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Let's take a look at the math.
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To generate $500 per month in dividends (or $6,000 annually), you'll need an initial investment of approximately $600,000. Vanguard S&P 500 ETF shares currently trade at almost $700 even. That means you'll need to own approximately 857 shares to create a $500 monthly income stream from this fund.
Obviously, with yields so low, now may not be the best time to use the S&P 500 as a passive income producer. Dividends can still be a significant part of an investment's total return. But the AI boom has made lower- or non-yielding tech stocks a much bigger part of the economy.
If you're looking to create a passive dividend income stream, a dividend ETF geared toward that purpose is likely the better choice today.
David Dierking has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.