Can you live off your dividend income?
Can you make more from the dividend income in the stock markets or would you make more from a bank FD?
The short answer is a bank FD. But that’s not the whole game here.
For everyone who wants to achieve and sustain financial freedom, having your dividend income > your personal annual expenses is crucial.
According to the Nifty Dividend 50 Index, it has netted an annual dividend yield of 3.7% approx. Yes, lower than a bank FD.
First, what’s this index?
Nifty dividend 50 index selects the 50 best dividend-paying companies from a pool of 300.
If you consider the top 25 of this index, your dividend yield would amount to 4.17%, still slightly lower than banks long term FD.
But if you include this dividend in combination with the capital appreciation, the returns correspond to 12.6% CAGR over a 5 year period.
So even though you can technically make more from a banks interest rate annually, it would not be a wise decision to sell your position in the markets solely for this purpose.
Cheers!
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