If you have been following along, then you know I love my dividends and this is my favorite time of the month when I get to add them all up and see who paid me. If you are brand new and just discovering our blog, we welcome you!
My investment philosophy is pretty simple. I want to build a portfolio of individual companies that pay a dividend (cash) and have a history of increasing those payments year after year regardless of what the market is doing. We want to build this portfolio as fast as we can to provide enough dividends every month to cover all of our expenses, plus a little more… I’m not greedy! When the portfolio gets to that point, we can essentially retire and never “have” to work another day in our lives. Please know that retirement is a financial number, not an age. The sooner you obtain that number the sooner you are free from the rat race. It doesn’t matter if you are 30 or 70.
I get this question a lot, “How do you know you won’t run out of money?” Well, if we are living exclusively off the dividends produced by our portfolio then that means that we are actually not selling any of the shares or taking money out of the account, we are only collecting and spending the dividend payments. This will essentially allow the portfolio to live on forever, passing to our kids, grand kids, and so forth, as long as I do a well enough job teaching them how to manage it. Hint: this is how all of those “evil” rich people seem to get richer and richer…they collect assets that pay them. Another Hint: you can do the same exact thing, no matter what income you have, you just have to be disciplined and learn it.
On to the good stuff…
We own shares in the following companies that paid us a dividend in April:
1. Philip Morris International (PM) – $26.42
2. Realty Income Corp (O) – $10.37
3. STAG Industrial (STAG) – $7.96
4. W.P. Carey Inc. (WPC) – $5.03
5. Aetna Inc. (AET) – $12.35
Total dividends received in the month of April – $62.13
There you have it, a cool $62.13 was deposited into our account for doing absolutely nothing. That gives us a total of $269.07 paid out in dividends this year. Our forward 12 month expected annual dividend is now up to $844 as compared to $834 in our March update.
Slowly and steadily moving higher and higher, and way more important to me than what the account value is at any certain point in time. Actually, I only look at the total account value once a month when I update my spread sheet…what it does in between those time periods I couldn’t care less. I know it will sound strange and go against the norm but I would be happier if the value dropped so that my reinvested dividends each month bought more shares therefore providing me with more dividends.
These small amounts might seem trivial to you at this point, but the fun and motivation is kicked up a notch when I look at my projections. Let’s assume we never add another dime to our portfolio and we just let it do its thing – reinvesting the dividends every month, year after year, until we hit full social security age of 67. What will we have? Our annual dividend payment will be north of $38,000 a year and have a value just shy of $1,000,000…remember that’s while not adding any more cash to it. That, my friends is the power of compounding: dividends paid, dividends reinvested, and companies raising their dividend payments.
But, of course I have no intentions of retiring when I’m 67 so we will be adding our dimes very aggressively to the portfolio over the next few years. Right now, our focus is on knocking out the rest of our consumer debts: car payment, student loans, credit cards, etc so that we can free up a tremendous amount of monthly cash flow to start building our portfolio with. You can read more about this process in my post Why paying off our debt is goal #1
For another quick example we will pay our last $300 car payment in May and we will never again have a car payment. Why? you ask, because using the same projection as above if I take that $300 a month and add it to the portfolio our annual dividend payment now exceeds $82,000 a year and the portfolio is worth just north of $2,000,000. I hope you really like that hunk of metal and plastic sitting out in the driveway!!!
If you need help coming up with a plan for your family just let me know, and I will be glad to help. I eventually want to start a financial coaching business, but until then my services are free. So take advantage of it now, haha.
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