Episode 2: Growing a Dividend Portfolio
Currently my dividend portfolio earns 4% in dividends every year. That means that for every $1,000 invested in the portfolio, those companies in my portfolio will pay me $40 each year just for owning their stocks. My mindset going into this is pretty simple… every $1,000 invested will pay one cell phone payment every year for the rest of my life. From here on out, I only have to pay 11 of the 12 payments each year because that $1,000 invested will take care of the last payment for me. After $12,000 is invested, I will have my cell phone payments covered for the rest of my life.
And then I just keep going down my list of expenses… electric bill, water bill, car insurance, rent, etc., until one day my dividend account covers each of my expenses. That’s the ultimate goal. By growing it to that level, I will have hit my retire-able net worth. And if I can accomplish that for my family, then we can have the freedom to work or not work. Volunteer. Enjoy passion projects. Travel. And so much more.
Decision on extra money
Our dividend portfolio is currently built on a biweekly amount transferred into the account. I then have a process to purchase dividend stocks across a range of industries. But recently we received an extra $1000 refund from one of our wedding vendors, which was outside the normal process. So I decided that I would split the amount evenly between all of the companies and ETFs that had a dividend percent over 4%. This led to extra shares purchased for 11 companies in our dividend portfolio. Using Fidelity, I was able to purchase partial shares for no commission, thus being able to spread out the $1000 among 11 companies without any high costs.
Overview of Dividend Portfolio
Stocks purchased with extra funds:
- T – AT&T Inc – 6.95%
- PEAK – Healthpeak Properties – 5.40%
- IDV – iShares International Dividend ETF – 5.37%
- IBM – IBM Corporation – 5.21%
- ABBV – AbbVie Inc – 4.99%
- PFG – Principal Financial Group – 4.99%
- SPHD – Invesco S&P 500 High Dividend Low Volatility – 4.72%
- O – Realty Income Corp – 4.56%
- USB – US Bancorp – 4.50%
- VZ – Verizon Communications – 4.20%
- SPYD – SPDR S&P 500 High Dividend – 5.31%
Performance versus S&P 500:
Our cell phone bill is now covered for three quarters of the year for the rest of our lives 🙂 We are also beating the S&P 500 earned dividend revenue by $379, but losing to the gains in the portfolio by -2.28%. It was also nice to see the portfolio dividend % pop back up to 4% from the previous week, which melds well with the 4% rule for retirement.
“The dividend is such an important factor in the success of many stocks that you could hardly go wrong by making an entire portfolio of companies that have raised their dividends for 10 or 20 years in a row.” -Peter Lynch
A company paying dividends that they consistently grow over time usually (I key in on usually because companies do misstep and cut/eliminate their dividend) means they are strong and profitable. These aspects are good to have in an investment. But largely, our dividend portfolio offers versatility in two key respects:
- For the time being, I can reinvest those dividends back into more investments that will also grow over time.
- And when we are ready to retire, we can use those dividends to pay for our expenses throughout the year.
You can get started by opening an investment or brokerage account. My favorite starter account is Robinhood. Simple interface, easy to use, and beginner friendly. You can open up an account in minutes and they will give you a free stock. Plus, if you use my link below, then Robinhood will give me one free stock too.
Disclaimer: These are my own personal thoughts and opinions on investing and finance. I may own companies discussed in this post, and I may have recommendations for or against any stocks mentioned, so don’t buy or sell anything based solely on what you read here. Please make sure to do your own research prior to investing any of your money.