How To Earn $500 Per Month From IBM Stock

International Business Machines Corp. IBM closed at $162.23 at the end of the trading session on Dec. 15. 

The New York-headquartered technology corporation filed its Form 10-Q for the quarter ending Sept. 30 in the last week of October. According to the filing, IBM's cash dividends for the nine months ended Sept. 30 were $4.5 billion. Cash dividends for the quarter were $1.66 per share and a cumulative $4.97 per share for the first three quarters of the year. 

Using $4.97 per share for three quarters, the annualized dividend for IBM stock is $6.63. Based on the price on Dec. 15, its dividend yield is 4.08%

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How Can You Earn $500 Per Month As An IBM Investor?

If you want to make $500 per month — $6,000 annually — from IBM's dividends, your investment value would be approximately $147,059, which is 907 shares at $162.23 each. If you want to earn $100 per month, your investment value drops to $29,412 or 182 shares.

Calculating the estimated value of investments using dividend yields: When estimating the investment value, you need two key factors: the desired annual income — $6,000 or $1,200 — and the dividend yield, which is 4.08% in this case. So, $6,000 / 0.0408 = $147,059 to generate an income of $500 per month, and $1,200 / 0.0408 = $29,412  for $100 per month.

You can calculate the dividend yield by dividing the annual dividend payments by the stock’s current price. The dividend yield is subject to change over time because stock prices and dividend payments fluctuate on a rolling basis.

For instance, assume a stock that pays $2 as an annual dividend is priced at $50. Its dividend yield would be $2 / $50 = 4%. If the stock price rises to $60, the dividend yield drops to 3.33% ($2 / $60). A drop in stock price to $40 will have an inverse effect and increase the dividend yield to 5% ($2 / $40).

Just like a change in stock price affects the yield, changes in the dividend payment can also impact the yield. Assuming the stock price remains the same, the dividend yield will increase when the company increases the dividend value and vice versa.

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Disclaimer: This calculation is according to the price per share on Dec. 15 using an annualized dividend. The price of IBM stock at the end of trading hours on Dec. 19 was  $161.56.