Dividend Income – February 2021

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While not unexpected … we set a record for our February dividend income in 2021 last month … shattering our previous monthly high (February 2020) by 41%!

This was after we earned a record $3,886.97 in dividend income in 2020. This year (2021) we expect to earn over $4,500 in dividend income.

Before we get started bragging about our February 2021 dividend income, I wanted to give a quick overview of our dividend stock portfolio.

We currently earn dividend income from over 40+ publicly traded companies, along with a couple of ETFs. The income we earn and are growing each year is part of our long term financial independence (FI) plan.

At some point in the future, we plan to use our annual passive dividend income to cover a portion of our yearly spending. We are building our portfolio of dividend stocks so that it can grow passively all on it’s own every year.

Based on some estimates, we could expect our dividend income to double every 8 years (or so) if we were to leave it alone. So in less than 20 years, we should be earning $20,000 annually in dividends (at a minimum).

That should be able to cover at least 25% of our projected spending at that time. This isn’t the only source of future income we are planning on … just part of the bigger puzzle!

And the great thing about earning dividend income is that it is tax friendly (currently) and inflation protected.

Today we are reporting our latest monthly dividend income results.

February 2021 Dividend Income – $305.98

Here is a breakdown of how we earned over $300 last month in dividends.

Dividend Income February 2021

In total we had 15 stocks pay out a dividend in February from our taxable brokerage accounts.

This was a fun month … as we saw a good combination of dividend income from all the different types of companies we own.

We received solid payments from a couple high yield dividend stocksAT&T (T) and AbbVie (ABBV).

Then there was the dividend payment from one of our buy and hold forever stocksProcter & Gamble (PG).

It was a very solid month from our Real Estate Income Trust (REIT) holdings – Realty Income (O) and Omega Healthcare.

Finally … February included a ton of payments from several of my favorite high dividend growth companies. In a few years, I expect February to be one of the best dividend earning months we have. These high dividend growth companies include – Lowe’s (LOW), Apple (AAPL), General Dynamics (GD), and Costco (COST).

Here is the breakdown of dividend income (by stock) in February from our taxable accounts.

The following stocks are held in our M1 Finance and Fidelity accounts that will be reported as income earned in 2021.

  • Omega Healthcare (OHI) – $75.04
  • AT&T (T) – $52.00
  • Clorox (CLX) – $41.33
  • Realty Income Corp (O) – $25.09
  • Caterpillar (CAT) – $21.63
  • Lowe’s Companies (LOW) – $19.37
  • Procter & Gamble (PG) – $16.11
  • Apple (AAPL) – $13.78
  • AbbVie (ABBV) – $13.36
  • Hormel Foods (HRL) – $6.37
  • General Dynamics (GD) – $5.82
  • Eaton Vance (EV) – $4.70
  • iShares Preferred ETF (PFF) – $4.19
  • CVS Health (CVS) – $4.00
  • Costco Wholesale (COST) – $3.19

February 2021 Taxable Dividend Income = $305.98

We continue to follow our buy and hold stock strategy with the dividend income we received last month.

This means that all of our income was reinvested to purchase additional shares of stock. In the past, we used DRiP for reinvestment but now make individual purchases with most our dividend income.

Growing Future Dividend Income

My favorite personal finance task is to update the dividend income we earn each month.

It is inspiring to watch our dividend income grow month after month and year after year.

But what is even better than reporting our dividend income earnings?

Tracking our future dividend income growth!

So every month we track our future annual dividend income.

This simple calculation takes the number of shares we own of each of our stocks and multiplies it by the current dividend of the company.

The result of this calculation represents the amount of income we could expect to earn over the next 12 months … if we walked away today and never touched our portfolio again.

This calculation assumes the companies that we own will not cut their dividend, which is unlikely (but not impossible).

There are 3 different ways we can grow our future dividend income –

  1. new investments
  2. reinvested dividends
  3. company dividend increases

Let’s take a look at how we grew our dividend income in February from these 3 different methods.

1 – New Investments in February

We invested $8,150.28 of new dollars into our dividend stock portfolio during February.

The majority of these new dollars were invested into my favorite high dividend growth stocks for 2021 including –

  • CostCo (COST)
  • General Dynamics (GD)
  • Lowe’s (LOW)
  • T. Rowe Price (TROW)
  • Microsoft (MSFT)

Now that we have built a solid foundation of stocks in our portfolio over the past decade, we have switched our focus to higher growth dividend stocks.

We are investing in companies with double digit dividend growth over the past 10 years … or at least very close.

Those weren’t our only investments with new dollars last month, but they make up the majority.

2 – Reinvested Dividends in February

In the past, we reinvested most of our dividends using DRiP. That was setup through our broker to automatically reinvest dividends of a stock back into partial shares of the same stock.

But now that we have a solid foundation built … we are letting most of our dividends accumulate and buying stocks directly on our own. I did recently flip the DRiP switch back on for a couple holdings – Apple (AAPL) and Microsoft (MSFT).

During February, we reinvested the majority of our $305.98 dividend income back into shares of Altria (MO) and Aflac (AFL).

3 – Company Dividend Increases in February

This is my absolute favorite way to grow our future income (and the easiest) … which is from company dividend increases. These increases make this a passive income stream that will grow each and every month all on it’s own.

The month of February had 8 dividend increases from companies we (currently) own shares in.

There were a lot of good increases in the month, especially from one of my favorite high growth dividend stocks – T. Rowe Price (TROW). Two other companies did not disappoint either – Home Depot (HD) and Best Buy (BBY).

Then there was the normal expected increases (below my 6% target) including – Walmart (WMT), Coca-Cola (KO), and PepsiCo (PEP). I have just come to expect around 2% dividend growth from Walmart and Coca-Cola these days.

Unfortunately, there was some disappointment too on dividend increases. Two companies I even decided to sell because of 1% increases – 3M (MMM) and United Parcel Service (UPS). Both of these positions were small and I decided the funds would be more useful invested in higher growth companies.

Typically I would not sell a holding when they raise their dividend … no matter how small. But I have put more focus lately on knowing when to sell my losers. That is not to say these stocks won’t be good dividend payers in the future … but I think our investments can go further in higher growth companies.

Companies that announced dividend hikes in February that we own include –

  • 27.27% increase from Best Buy (BBY)
  • 20.00% increase from T. Rowe Price (TROW)
  • 10.00% increase from Home Depot (HD)
  • 5.13% increase from PepsiCo (PEP)
  • 3.16% increase from Genuine Parts Company (GPC)
  • 2.78% increase from Cisco Systems (CSCO)
  • 2.44% increase from Coca-Cola (KO)
  • 1.85% increase from Walmart (WMT)

Typically I like to see companies increase their dividend by 6% or more. So far in 2021, that hasn’t happened overall … so this is something I am watching.

The good news is that my portfolio weighted average dividend growth is just under 5% still. The goal is to keep this income stream growing faster than inflation … all by itself.

Total Future Annual Dividend Income

We started the new year (2021) with a future annual dividend income total of $4,333.23. Then in January we increased that number by over $175 to $4,509.89.

This number represents what we could expect to earn in dividend income this entire year … if we never invested a single new dollar, reinvested any dividend income, and no company provided a dividend increase for the next 12 months.

Now with all those new investment dollars, dividend increases, and reinvestment’s … we have grown our future dividend income by over $300 (compared to January) to $4,840.86!

For 2021 in total we have grown our future dividend income by $507.63!

This increase came from three different sources –

  • new investments ($8,000+) – most of the increase
  • 8 companies raised dividends
  • reinvested dividend income – $305.98

February 2021 Future Annual Dividend Income = $4,840.86

At the current rate, we are looking to push past the $5,000 future dividend income mark sometime in 2021.

So what does this mean for future growth?

I like to use the rule of 72 formula to predict what our dividend income “could” look like in the future.

Let’s take a look at the rule of 72 dividend income projection.

The Rule of 72 Projections

By using the rule of 72 calculation below, it helps us project out when our income will double by using our future dividend income.

Using the rule of 72, I have estimated that our dividend income will double about every 8 years.

This is based on our goal to increase dividend income by 9% (at a minimum) every year. For example, between 2019 to 2020 … we increased our dividend income by 9.6%. This year (2021) we will likely grow our dividend income by over 15%.

As long as we can grow our dividend income by 9% or more, we will double our dividend income every 8 years … or less.

Based on this, I can calculate out how our dividend income could grow (and double) based on our future annual dividend income number of $4,840.86 … that would be earned on March 1, 2022.

Take a look at how our income could double overtime –

  • 03/01/2022 – Annual Dividend Income = $4,840.86
  • 03/01/2030 – Annual Dividend Income = $9,681.72
  • 03/01/2038 – Annual Dividend Income = $19,363.44
  • 03/01/2046 – Annual Dividend Income = $38,726.88

Our updated figures tell us we should be earning almost $39,000 per year in dividend income by March 2046.

Keep in mind, this is more of a fun what-if type of scenario. I believe we have figured conservatively … and our income should grow at a faster rate. And it should be fun to watch this number grow every month when we post results.

It is also important to remember that all of this income is in taxable accounts … which means we potentially may pay taxes on some of this income.

The good news is that most of our income comes from qualified dividends … and the majority of it won’t be taxed under current tax law.

Dividend Income February 2021 Summary

In February, we earned $305.98 of dividend income from our taxable brokerage accounts. This was our largest February dividend income month ever … as we blew away our past February (2020) high of $216.99!

The dividend income amount would cover my monthly car payment or it would pay for all of our monthly utility bills.

My wife and I have set a long term goal from this dividend income portfolio to cover at least a 25% of our monthly expenses … which right now is about $1,250 (our monthly spending is currently around $5,000).

Our family would have a lot more flexibility knowing a good portion of our monthly expenses could be covered by our passive dividend income stream. That is an awesome feeling.

The overall goal for 2021 is to earn $4,500 in dividend income from our taxable brokerage accounts.

After 1 month, we are $3,972.78 behind our goal. We would need to average about $400 per month the rest of the year to hit our target.

Not to worry though as January and February are always our lowest dividend income months. Most of our dividend income is actually earned during – March, June, September, and December.

Another bright spot is that we increased our forward dividend income by over $300!

We are now on pace to earn $4,840.86 over the next 12 months … without doing anything. This figure does not include any new investments throughout the year. No dividend increases and no dividend income reinvested.

With the recent investments and growth … I actually think we will get very close to hitting $5,000 (but not quite there) in dividends for 2021.

I really looking forward to an awesome 2021 for building our dividend income stream!

How was your dividend income in February? Are you actively investing and growing your portfolio?

Full Disclosure – At the time of this writing, we owned shares in all of the stocks mentioned in this post. The material above is not a recommendation to buy. Please do your own research on a company before deciding to invest.

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