I have a confession to make.

For the longest time I’ve been having an affair.

A burning, passionate love based on mutual respect and appreciation…  with my dividend income stocks.

Why I Love Dividend Income

You, like me, want to be free.

Free to choose your own path.

Free to decide where and when to spend your time and attention.

Free to make the best choices for you and yours based on what matters, not just what’s there.

Financial freedom gives you the power to make the choice that matters most to you.  It’s not about saying what’s right, but leaving you the space to think and choose, not having to do what’s expedient because you lack the time, the money, or more, to do what you truly want to do.

You can achieve financial freedom many different ways, but at its core, it means your passive income exceeds your expenses.  Whether you receive passive income from product sales (books, online courses), real estate (rent), loans (peer to peer, CDs, banks), or stocks (dividends, options), the key point is it’s passive.  You’re not trading your time for money, but receiving money now, and in the future, for past action.

In short, you get paid every day whether you work or not

Dividend stocks are a great way to generate passive income.  Without getting into too much detail, when you buy a dividend stock, like AT&T (T), the company pays you a dividend for each share you own.  How big a dividend?  Well, that depends on the stock.  To drastically simplify, dividend yield (dividend divided by stock price) has been in the low single digits, e.g. Dow Industrials averages 3.2%, so a $100 investment would return you $3.20 a year, but it varies depending on the economy.

You can accelerate your dividend income with two force multipliers: reinvested dividends and dividend growth.

Reinvested dividends is straightforward.  Every dividend payment you receive each quarter you use to buy more stock.  Most brokers will do this automatically, with no transaction fees.  The more stock you own, the more dividends you receive.

Dividend growth is like inflation but in your favor.  Companies want you to invest in their stock, so they make it more attractive by raising the dividend payment every year.  This varies from stock to stock and from year to year, but the S & P 500 is currently averaging 5.8%.

Combine the two with time and you can really watch your income grow.

All you have to do is make that first investment.

Dividend Income Report

So how my dividend stocks been doing lately?   Just fine.

My current portfolio is

  • AT&T (T)
  • Clorox (CLX)
  • Leggett & Platt (LEG)
  • Olin Corp (OLN)

For 2016-Q4, they earned me $1,561 in quarterly dividends (a projected average annual yield of 3.6%).  This is the equivalent of $6,244 in annual dividends or $17 a day.

Imagine that, I was paid $17 today for doing absolutely nothing.

And here comes another $17 tomorrow.  And the day after that.

Forever.

It may not seem like much, especially when compared to my average daily expenses.  But in time, the trickle will become the stream that carries me into a secure retirement.

Closing Thoughts

Given my love for dividend stocks, this update has been a long time coming.  Expect regular quarterly updates going forward, along with more articles on dividend investing in general – how I pick my dividend stocks, DRiP investing, and other tools and resources for the dividend investor.

Between my recent 401k rollover and usual IRA contributions, I’ll be adding some more dividend stocks to the portfolio in the coming months.  While the current valuations in the stock market are enough to make anyone pause, if you’re patient, there are always opportunities available in dividend stocks.

Many people will argue stocks are for capital appreciation, and 3-5% yield from dividend stocks is a sucker’s game.  But you know what?  When it comes to investing, I’d rather have a nice, predictable ride on a horse, than a tiger by the tail…

Readers: Do you invest in dividend stocks?  Why or why not?  Tell us your story in a comment below.

Photo of stacked coins courtesy of Pexels.

4 COMMENTS

  1. I want to incorporate dividend stocks into my future investment portfolio. Currently, I’m trying to build up other income streams in real estate and a blog. I want to have at least 1 more property. I’m surprised you have 4 stocks in your portfolio, but at the same time, if they work for you, then why not?

    $17 a day is nothing to scoff at. Do you have any recommendations for material on learning more about dividend stocks?
    Erik @ The Mastermind Within recently posted K.I.S.S. – 8 Personal Finance TipsMy Profile

    • My target is around 25 stocks across a variety of industries. One of my goals is to own at least two stocks I can use to give my sons each their own physical stock certificate as part of getting them started in investing.

      I’ll write more in a later post, but one of the best resources for dividend investing is dripinvesting.org.

  2. Dividend stocks are great. I’m working on building my portfolio slowly and hope that eventually the dividends will contribute to my income but at the moment they are set up on a dividend reinvestment plan so that my portfolio grows regardless of whether I put extra cash into it. At the same time I’m hoping to balance them out with growth stocks too. It’s all about finding that balance.
    All the best with growing your portfolio!

    • I know. Balancing growth and dividend investments is a personal choice. I’m leaning more dividend these days with the high P/E ratios in the markets of late. For now my only growth investment is an S&P 500 index fund, but it’s a smaller investment than my dividend stocks.

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