What a great time of the year to receive the next installment of my “truly” passive income. By luck, it just so happens that my next series of payments from my dividend paying stocks was scheduled to be paid in December. Couldn’t we all use a little extra cash right before Christmas as the bills start rolling in?
Over on the left are the results of my third batch of quarterly dividend payments received for Quarter 4 (Q4).
Performance Report of My Stocks with High Dividends:
The fourth quarter had a few surprises. Eaton (ETN) finally made a comeback and got back up (and over) my initial purchase price. Unfortunately, Chevron (CVX) fell pretty good between quarters. She went down from $120 all the way down to $105 (below my initial purchase price), but then thankfully rebounded. Johnson and Johnson (JNJ) is still holding strong well above my initial purchase price. McDonalds (MCD) is still the biggest loser of the group.
Overall, both the change in capital and partial dividend gain is netting a positive return!
The Time is Almost Near:
In January, I plan to make my stock picking life easy and implement the Dogs of the Dow strategy for my next purchase of stocks with high dividends.
As a quick recap, the idea here is to invest in high quality stocks with higher dividend yields. The theory is that a higher dividend yield will indicate that the dividend paying stock is under-valued, and may potentially go up in price as investors flock to it to capture the attractive yield. The rationale behind this trend is well laid out in the book “Dividends Still Don’t Lie” by Kelley Wright.
My only question going forward is:
1) Do I go with “the Dogs” (top 10 stocks)? – or
2) Do I go with the “Small Dogs” (top 5 stocks)?
Looking at dogsofthedow.com, the Small Dogs have tended to beat the regular Dogs over the long haul by 1.7% annually. However, I’m sure that also means a higher Beta (measure of fluctuation in price). Since I don’t need the money right away and have many years to invest, this may be an acceptable trade-off between risk and return.
More Stocks with High Dividends for Us:
My current goal over the next 3 years is to get my dividend income payments up to $100 per month. That would be $300 per quarter or $1,200 per year. However, it would take a portfolio of over $30,000 in dividend paying stocks (assuming a 4% dividend yield). Because of the structure of my income, I should be able to make a substantial contribution to this effort in January.
In addition, I have also given strong consideration to the choice to purchase taxable stocks with high dividends versus maxing out our tax sheltered 403b retirement plan. I believe that doing so will help us structure our assets in a way that will enable my family to reach early retirement much sooner.
If all goes well, we’ll work towards my larger goal to go from $100 to $1,000 per month in dividend stock income!
Readers – Who’s joining my plan to buy some stocks with high dividends using the Dogs of the Dow strategy? Do you have any other investment plans for the New Year?
Image Credits: MMD