I can’t say enough good things about dividends. But I’ll try. For starters, dividends are the easiest money I’ve ever earned. Once I buy the stock, I get to go on with my life, while perpetually receiving ever-increasing amounts of money due to dividend increases and compounding of those payouts.
The next best thing about dividends is the unlimited earning potential. Unlike a 401K or an IRA, which are capped, there is no limit to the amount of dividend stock I can buy. If I decide I want to increase my dividend income I can just buy more dividend-paying stock.
I’m not done yet. Dividends are also very liquid. Whenever I need the dividends that my stocks generate, all I need to do is click a button and the dividend income will go straight to my checking account. Just like that, cold-hard-cash in my account without having to sell a single share of stock.
And finally, if everything I just mentioned wasn’t enough, how about this: the money generated from stocks(dividends) is only taxed between 15% and 20% depending on your tax bracket. The money you go out and work for is being taxed anywhere from 25% to 38%t. I don’t know about you but I need a little more, high-reward low-effort money-making in my life.
Where I started:
In 2017, I purchased three stocks. The first dividend I received was from Starbucks (SBUX) $0.88, Bank of America $0.82 (BAC) and PSE&G(PEG) $1.32. I was not impressed. However, I continued to sporadically make additional purchases and then I completely stopped and focused on the purchase of my home.
In late November of 2017 something caught my attention. I had received a dividend reinvestment notice of $7.88 going into my brokerage account. My dividend from Starbucks had gone from $0.88 to $7.88, PEG had gone from $1.32 to $9.04 and BAC from $0.82 to $2.79. It had been about four months since I even thought about those stocks. I had dropped the ball but it continued to bounce without me. I made $42.24 in dividends in 2017!
I realized I was on to something and decided that dividend investing really suited me. My goal in 2018 was to simply double the $42.24 I made in 2017. Well, I outdid myself. In 2018, I received more than five times the dividends I received in 2017, for a total of $234.47. That was a 420% increase YOY.
I wanted more of the same in 2019. Once again I planned to double what I earned in 2018. How did I do? I just missed it, earning $447.79 in dividends in 2019.
I’m not one for excuses but I would like to explain how an oversight on my part caused me to miss it. I ran the numbers and timed my purchases just right. My numbers showed that I would exceed my goal by a couple of dollars. I made my final purchase of IRM and I was going to receive no less than $24.50 in dividends from IRM. Then somewhere around the second week of December I went online and learned the dividend wouldn’t be paid until January 2. And just like that I missed the mark. Below is a visual of my dividend progress over the last few years.
While I missed the mark by $21, I’m still very happy with the progress I’ve made. In terms of where I am in building a dividend portfolio, I’d say infancy. I think I’ll be out of the infancy stage when the portfolio is generating at least $3,000 a year.
What is my plan for 2020? To double my 2019 amount. Of course, it gets harder and will be nearly impossible for me to double my progress much longer but I’m going for it one more time this year. How will I go about it? First, I’ll need to triple my efforts to get the results I want by the end of 2020. Then, I plan to work on building up the smaller positions in the portfolio. I want every stock in the portfolio to clear no less than $10/quarter. I also have a few stocks that I’m close to having 100 shares of and I plan to get them each to 100 by the end of the first quarter. And finally, I have about seven new stocks that I’ve been watching that I want to add to my portfolio no later than June.
I hope this update motivates you to move forward with your financial plans. And remember:
It is a fight to build wealth no matter where you are in the process. Everything around us conspires to take money out of our hands. But you must fight the good fight. Continue to save, invest, and grow your net worth even when it seems impossible. Save your pennies (copper) until they become dollars (cotton).