As many of you know, 2012 is the first year that I have really overhauled my stock investment strategy and changed my focus to simply collecting high-quality dividend paying stocks. Just like any dividend investor can tell you, dividend payment income is a pretty remarkable source of “truly” passive income. I prefix passive income with “truly” because the income they generate literally requires no effort on my part. I simply collect the payments each quarter!
As of this month, I am happy to report the second installment of my quarterly dividend payments received. Please see the image on the left for the total.
Goals for My Dividend Payment Portfolio:
Okay, I know ~$60 of dividend payment income is nothing to get crazy about. Hold on to your seats, right? But remember: $60 could just as easily become $600 or $6,000 over time. What I’m most interested in with this strategy is the potential I see for creating passive income, lower tax payments, and building a bridge of income during early retirement to get me to my other nest egg accounts.
In the next 3 years, I’d like to see my dividend payment income up to $100 per month ($1,200 per year). At a 4% dividend yield, that means I’d have to work my way up to a $30,000 portfolio of dividend paying stocks. Although that sounds like a lot of money, I’m very confident that I could pull this off.
As I’ve previously mentioned, my next round of stock picks is going to be an easy one: I plan to implement the Dogs of the Dow strategy for my next purchase of dividend paying stocks early next year (when I receive my profit sharing check). The Dogs currently have a year to date (YTD) dividend yield between 3.6 and 3.7%, and the portfolio is up 10.5 to 12.5% (depending on which version of the strategy you’re using). Given everything that’s happened this year, that’s not too bad of a return!
My Dividend Payment Portfolio Stock Performance:
For anyone wondering about the equity risk of owning dividend paying stocks, I’ve decided to also include the stock price performance as part of this report:
The second quarter of this year was a little bit of a roller-coaster ride in terms of prices. I’m happy to see that in this short amount of time that the overall portfolio has just barely squeaked by with a marginal positive change in value. You’ve got to remember that sometimes simply not having a loss is a victory!
Despite not much real change in equity, the dividend payments push this portfolio upward over into positive territory!
* Big Disclaimer – Don’t buy these stocks just because I did! Please do your own research or consult professional before taking any action.
If you’re interested in learning more about dividend paying stocks, please check out my following other posts:
1) How to Read and Evaluate Basic Stock Metrics
2) Book Review: “The Little Book of Big Dividends” by Charles B. Carlson
3) Protecting Yourself with Dividend Stocks
4) Using the Dogs of the Dow to Buy the Best Dividend Paying Stocks
Readers – What do you think about my latest dividend payment income? Is it time to quit my job? Just kidding! 
Who else is using dividend paying stocks as part of their income generation or retirement strategy?
Image Credits: MMD
Mike@WeOnlyDoThis... (10)
Matt Becker (9)
Integrator (8)
Kim@Eyesonthedollar (8)
Martin (8)
John S @ Frugal R... (7)
Chris @ Stumble F... (5)
Pretired Nick (5)
Canadian Budget B... (4)
Jacob@CashCowCouple (4)
I use a dividend strategy, to some extent, for both retirement savings as well as education accounts for our kids. In today’s rate climate, getting a 3-4% return can be nice. The one thing I wonder though, is that a lot of people are going into dividend payers, so just be careful and like you said do your research before making a decision.
John S @ Frugal Rules recently posted..7 Frugal Ways to Save Money at Costco
When that happens, I’ve got a feeling we’ll be able to tell which ones those are because all those new investors will drive the price up and dividend yield down.
$60 isn’t something to sneeze at as it’s more than I made in my savings account!
I’d take $60 over the $2 I earned any day.
We don’t have a dividend strategy as I’m not overly convinced that it’s the best way to grow money. I think in the latter stages of investing and as you near retirement it could be a good idea. The overall ROI of your portfolio would suggest that it might have just been better to be in the market and earn the 12% in a well-diversified portfolio.
Jason recently posted..Recipe: Vegetarian Enchiladas
12%!! What are you investing in?? Please share with me!
I love it! This is why I love high yield bonds, too. It’s easy to see the huge dividend reinvesting. When that number becomes large enough to retire, then you’re done! (Well, not quite, due to inflation…but you know the idea….)
AverageJoe recently posted..Why You Shouldn’t Invest Like President Obama
I like the security of bonds much better than stocks. I’m partial to the stocks just because they have a chance of equity appreciation as well as dividend income. If bonds ever got back up to beyond Index Fund returns, I’d be all over them!
I just worry that dividend stocks are overbought right now with all of the hype of being able to get a decent return from them. What happens when savings account rates get back to 4 or 5 percent?
Lance@MoneyLife&More recently posted..Is Being On Reality TV Worth the Money If You Don’t Win?
If my Ally account ever got back up to 5%, I’d probably buy a long-term CD and lock into that great rate! Not to mention bond rates would probably also be really attractive as well!
I’m going to be closely following your progress with this MMD. I am focusing on dividend paying stocks too, but it’s all sitting in a lame mutual fund right now. Once I find the time to do more research I’ll be directly buying mostly dividend paying stocks. The Dogs strategy seems particularly tempting. It would take some of the research work out of the equation.
Modest Money recently posted..Catering Your Blog To Your Readership
Thanks! I hope to not disappoint. Check back in December for the next update. As soon as I have my next wind-fall, I’ll be trying out the Dogs. That will probably be February.
This is an interesting strategy by all means, but I’m not sure I’m convinced that 4% yield is better than taking all of that money and pumping it into another web property. Web real estate is awesome, and I’m starting to appreciate it more than real investing.
Veronica @ Pelican on Money recently posted..Make Your Credit Cards Work for You
As am I, Veronica! In the last 6 months I’ve made a pretty decent return on my efforts – and its made me wonder if there are some real short term gains to be made. But its still been no cake walk. I am trying to build up a niche site right now which is proving harder than I originally thought. There seem to be a lot of rules and tricks to the whole SEO, backlinking thing.
For me personally, I like dividend stocks in my retirement fund, but I would probably take that $30K and put it toward an investment property. I just have that bug right now. Do you reinvest your dividends currently?
Kim@Eyesonthedollar recently posted..Rental Property Series: Overcoming Setbacks
Rental property has got my eye too! My wife and I were browsing houses online in our area the other night. My only question though is could I made more money by developing another website (or putting more effort into this one)?
~$60 isn’t bad – especially for free money!
Are you reinvesting the dividends into those stocks, or collecting them in your brokerage account for purchase of your next round? also, Who’s your broker?
Joe Morgan recently posted..I Was Wrong About Gold Coins From Blanchard, Rosland And Lear Capital.
Since I’m testing this out, I have not setup a DRIP and am just letting the money sit in the brokerage account for my next go-around. I’m using Fidelity. Ever since they lowered their prices down from $20 per trade to $8, I’ve been pretty happy with them. They’ve got a ton of information and statistics available. But the main reason I prefer them is so that I can also transfer money to mutual funds if I wish.
Dividend paying stocks make you rich over the time. I am focusing more on dividend income going forward.
Shilpan recently posted..6 Must Decisions for Your Financial Success
Dividend stocks are truly a source of passive income. However, you should continuously buy these stocks so your income will increase considerably.
I’m also buying dividend stocks little by little as another source of income from stock investing.
Little by little, that’s how I plan to build my empire!
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