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How to Grow Dividend Income – November 2016 Updates

The fastest way to grow your dividend income is through new investments.

Over the past decade, my family has managed to live below our means.

Basically, our expenses have been slightly lower than our income. And any income leftover has been put away in savings or invested into dividend stocks.

Recently, we have changed our focus from living within our means to living well below our means.

This doesn’t mean we are cutting out every expense from our budget. However, it does mean we are getting serious about saving more of our income.

Saving 20% of Your Income

I think a good threshold (and one that we started using last year), is to try and save 20% of your income.

We slipped up a little last year, but overall … it shouldn’t be unattainable for our family to save 20% of our income.

Based on our current income, our threshold for savings each month is $1,080 … or $12,960 annually.

And when I say “save”, I actually mean “invest”. Remember … we ALWAYS want to have our money working for us earning more income.

A savings account earning less than .5% just doesn’t work for us, so we invest it in dividend stocks instead.

Saving More Than 20% of Our Income

Now that our baseline of saving (or investing) $1,080 each month has been set … we don’t have plans to raise it.

Even if our income increases, we will use this figure as our baseline to build from.

We do plan on saving way more than 20% of our income though. In fact, we have plans to save approximately 26.5% of our income over the next year.

This new savings rate was based on a goal to grow our annual dividend income by over 40% before the end of next year.

This November was our first month following these guidelines and our savings/investing results are below.

Grow Our Annual Dividend Income – $3,000

Learn the method we are using to grow our dividend income.We have a goal (set back in October 2016) to grow our annual dividend income to $3,000 by the end of 2017.

At the time we decided on this new goal, our estimated annual dividend income was $2,100.

So in 14 months, we need to increase our future dividend income estimates by approximately $900. That may not seem like a lot, but it will take a lot of capital to reach this goal.

Based on an aggressive yield on cost (YOC) of 4.50%, increasing our dividend income by $900 would require $20,000 in new investments over that time.

That averages out to about $1,430 in new investments per month – which is a little over 26% of our income.

These figures assume several things.

First, we are assuming the $2,100 in future annual dividend income is safe. This means that companies that we own will not make any dividend cuts.

Second, these calculations also assume that a combination of new investments, dividend reinvestment, and dividend increases will help us maintain a 4.50% yield.

November 2016 Investments

Instead of tracking our savings each month, we will track the investments we are making. This will give us a monthly snapshot of how close we are to hitting our target of raising our future annual dividend income to $3,000.

Over the course of November, we invested new money into 5 different stocks. We purchased 3 stocks in our LOYAL3 account (AAPL, TGT, and WMT), while we bought 2 stocks in our Robinhood account (ADM, AFL).

I plan to add additional detail to our purchases in our November dividend results post, but here is a quick look at our investments. Pay close attention to the “annual income” numbers I have provided. This income represents our estimated dividend income increase for the next 12 months.

  • $250.00 in Apple Inc. (AAPL) – $5.16 annual income
  • $253.14 in Archer Daniels Midland (ADM) – $7.20 annual income
  • $288.17 in Aflac Inc. (AFL) – $6.88 annual income
  • $150.00 in Target Corp. (TGT) – $4.74 annual income
  • $150.00 in Wal-Mart Stores (WMT) – $4.36 annual income

Overall, we invested $1,091.31 in new shares of stock. This has increased our forward annual dividend income by $28.24.

$1,091.31 total invested in November = $28.34 future annual income

The yield on cost for these new investments is 2.6%.

Note – Yield on cost for new investments is usually low as they have not had time to compound. On the other hand, stocks that have had time to grow will have much higher returns – like our 10+% yield on one of our stocks.

Our investments fell short by $338.69 for the first month ($1,430 – $1,091.31). We actually had the money to invest the extra, but couldn’t settle on a stock pick.

We should still be on track when we report back in December.

Updated Annual Dividend Income Estimates

At the start of the month, our estimated annual dividend income was $2,100. Our goal by the end of 2017 is to push this number up to $3,000.

Our updated annual dividend income estimates at the end of November rose to $2,147.40. That is a $47.40 increase last month.

November 2016 Annual Dividend Income = $2,147.40

Of the increase, $28.24 was a result of the new investments we made. The remainder of the increase ($19.16) came from reinvested dividends and company dividend increases.

Remember … dividend income will grow from 3 different sources

  1. Reinvested Dividends
  2. Dividend Increases
  3. New Investments

On average, we need to try and increase our future dividend income by $64.29 each month. We are behind by $16.89 ($64.29 – $47.40).

Some of this difference is based on falling $300+ short on new investments.

Conclusion

We fell a little behind in the first month of tracking our investments to reach $3,000 in future dividend income.

In order to pick back up, we need to make sure our December investments are inline with our goals. And eventually start to make up the difference in missed investments from November.

Next spring when our tax return comes in, we should be able to invest the majority of it and catch back up.

In the meantime, we will work at increasing our savings any way we can. And hopefully increasing our income from side hustles to help out.

How much of your income do you invest? Are you constantly looking for opportunities to increase your savings/investing rate?

Click Here to Leave a Comment Below 6 comments
JCP - December 1, 2016

Thank you for the post. I stumbled across your blog in July of this year and have started to follow this strategy for investing. Small Steps.

Reply
    John - December 1, 2016

    @JCP – Thanks for stopping by and following along. I wish we had more income to invest each month, but as long as we are taking small steps … we will eventually get there. Good luck with your investing.

    Reply
Zach - December 2, 2016

Hey there- stumbled upon your blog whilst conducting some basic dividend investing research. Love it! Really appreciate the transparency on sharing progress to goals. Good to know I’m not the only that falls short sometime. Will be reading through your articles now – keep up the good work & glad I found your site!

Cheers,
Z

Reply
    John - December 2, 2016

    @Zach – Thanks for following along. Hope you can find some valuable information here. Good luck with building your portfolio.

    Reply
EL - December 2, 2016

It takes great effort to grow dividends, as only 4% of investable assets on average get paid back. Saving 20% is a very good savings rate, and about 4 times the average of America. Good Luck in December.

Reply
    John - December 3, 2016

    @EL – Thanks! Our plan is to eventually get up to 50% savings (or investing rate). Appreciate the comments and for stopping by.

    Reply

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