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After earning a personal record $3,886.97 in dividend income in 2020, we started off the new year strong! Our January 2021 dividend income results are in … and we set a new record for the month!
Before we get started bragging about our January 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.
Based on some back of the envelope calculations, 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 25% to 40% 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!
Today we are reporting our latest monthly dividend income results.
January 2021 Dividend Income – $221.24
Here is a breakdown of how we earned over $220 last month in dividends.
Dividend Income January 2021
In total we had 10 stocks pay out a dividend in January from our taxable brokerage accounts.
Fantastic dividend paying companies like Altria, Walmart, and Sysco wrote our family a dividend check … just for owning shares in their company. Okay … we didn’t actually get a check but rather a deposit into our accounts.
Here is the breakdown of dividend income (by stock) in January 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.
- Cincinnati Financial (CINF) – $58.66
- Altria Group (MO) – $36.52
- Cisco Corp. (CSCO) – $32.04
- Walmart (WMT) – $30.22
- Realty Income Corp (O) – $25.09
- Sysco Corp. (SYY) – $15.30
- Genuine Parts Co. (GPC) – $9.33
- Best Buy Co. (BBY) – $5.90
- PepsiCo (PEP) – $4.29
- Illinois Tool Works (ITW) – $3.89
January 2021 Taxable Dividend Income = $221.24
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 our dividend income.
Growing Future Dividend Income
My favorite monthly personal finance task is to update the dividend income we earned.
It is very inspiring to watch our dividend income grow month after month and year after year. This is probably one of the best ways to stay motivated in hitting our investment goals.
But what is even better than reporting our dividend income earnings?
Tracking our future dividend income growth!
Every month we track our future annual dividend income.
This is a very simple calculation that 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.
How cool is that?
Of course 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 –
- new investments
- reinvested dividends
- company dividend increases
Let’s take a look at how we grew our dividend income in January from these 3 different methods.
1 – New Investments in January
We invested $5,260.48 of new dollars into our dividend stock portfolio during January.
The majority of these new dollars were invested into my favorite high dividend growth stocks for 2021 including –
- Aflac (AFL)
- CostCo (COST)
- General Dynamics (GD)
- Lowe’s (LOW)
- T. Rowe Price (TROW)
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 are only investments with new dollars last month, but they make up the majority.
2 – Reinvested Dividends in January
We used to reinvest 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 again … since we have built a good foundation of stocks so far … we are letting our dividends accumulate and making purchases directly on our own.
This helps now as most brokerage accounts offer free trades. In the past this wasn’t the case, so we leveraged the dividend reinvestment back then.
During January, we reinvested the majority of our $221.24 dividend income back into shares of Altria (MO). This is a high yield dividend stock that we are trying to build up our position in.
3 – Company Dividend Increases in January
This is my absolute favorite way to grow our future income (and the easiest) … which is from company dividend increases. This is truly a passive income stream that will grow each and every month all on it’s own.
The month of January had 5 dividend increases from companies we own shares in.
Companies that announced dividend hikes in January that we own include –
- 2.86% increase from Archer Daniels Midland (ADM)
- 1.30% increase from Consolidated Edison (ED)
- 5.30% increase from Intel Corporation (INTC)
- 5.32% increase from Norfolk Southern (NSC)
- 5.00% increase from Cincinnati Financial (CINF)
Typically I like to see companies increase their dividend by 6% or more. However during the COVID pandemic, I am simply happy to see the stocks we own continue to raise their dividend by any amount.
The good news is because of these company increases … our dividend income stream will continue to grow every year even if we never invest another penny. That is what makes this a fantastic passive income stream!
Total Future Annual Dividend Income
We started the new year (2021) with a future annual dividend income total of $4,333.23.
That 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.
So far in just one month, we have grown our future dividend income by over $175 to $4,509.89!
This increase came from three different sources –
- new investments ($5,000+) – most of the increase
- 5 companies raised dividends – ADM, ED, INTC, NSC, and CINF
- reinvested dividend income – $221.24
January 2021 Future Annual Dividend Income = $4,509.89
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 10%.
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 $4,509.89 … that would be earned on February 1, 2022.
Take a look at how our income could double overtime –
- 02/01/2022 – Annual Dividend Income = $4,509.89
- 02/01/2030 – Annual Dividend Income = $9,019.78
- 02/01/2038 – Annual Dividend Income = $18,039.56
- 02/01/2046 – Annual Dividend Income = $36,079.12
Our updated figures tell us we should be earning over $36,000 per year in dividend income by February 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.
January 2021 Dividend Income Summary
In January, we earned $221.24 of dividend income from our taxable brokerage accounts. This was our largest January dividend income month ever … as we blew away our past January high of $185.56!
The dividend income amount could almost cover our monthly car payment or it would mostly cover 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 quarter 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 $4,278.76 behind our goal. We would need to average about $390 per month the rest of the year to hit our target.
Not to worry though as January is always our lowest dividend income month. 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 $175!
We are now on pace to earn $4,509.89 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.
I really looking forward to an awesome 2021 for building our dividend income stream!
How was your dividend income in January? Are you actively investing and growing your portfolio or maybe waiting for a market correction?
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.