Here's How Much You'd Need to Invest in VGT to Generate $500 per Month in Dividends
Key Points
The Vanguard Information Technology ETF (VGT) has been one of the market's best performers in recent years.
The tech sector is slowly becoming a place where you can find more dividend stocks.
Here's exactly how much you'd need to generate a sizable passive income stream from this fund.
The Vanguard Information Technology ETF (NYSEMKT: VGT) has been one of the market's best performers over the past few years. With the artificial intelligence (AI) revolution as a tailwind, it has delivered huge returns for investors.
But this fund has never been an income generator, and only a very small percentage of its total return comes from dividends. The tech sector is, however, slowly becoming more of a place to find dividends. Microsoft, Apple, and Broadcom have all built 10-plus-year track records of annual dividend growth. But their yields remain below 1%.
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You can try using this ETF as an income generator, but it will require a substantial investment to produce $500 in monthly dividends.
The Vanguard Information Technology ETF currently yields just 0.33%. If you want $500 of monthly income from this fund (or $6,000 annually), it would require an initial investment of roughly $1.82 million.
The yield is so low, obviously, because many of these tech companies are using all available resources to reinvest back into the business for growth. That's especially true now, as companies are committing hundreds of billions of dollars to AI development.
Clearly, this fund isn't built to be an income generator. It's best served within the growth equity portion of your portfolio as a long-term position. Volatility will create periods when drawdowns could be significant. But with a steady buy-and-hold process and ongoing systematic investments in it, the Vanguard Information Technology ETF has a strong outlook.
David Dierking has positions in Apple and Vanguard Information Technology ETF. The Motley Fool has positions in and recommends Apple, Broadcom, and Microsoft. The Motley Fool has a disclosure policy.