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We have a goal this year to earn ,400 in dividend income. Unless companies start slashing their dividends in the next 4 months … I expect we will surpass that mark by a few dollars.
Earning $2,400 in dividends might not seem that significant, but after earning just under $2,000 in dividends last year, that is a 20% increase in income.
And next year, we have even larger goals of earning $3,000 in dividend income for 2018. That would be a 25% increase in dividend income from what we expect to earn this year.
As you can see, investing in quality dividend stocks can provide a sustainable income stream that will grow year after year.
Even if we never invested another dollar into the market, our portfolio would likely grow 5% to 7% each year from reinvestment’s and company dividend increases.
So you may be wondering, how are we growing our dividend income by 20% each year? The majority of our increases now are from new investments.
The more money we can invest now, the greater our dividend income will be years down the road. That is why we set a goal to increase our future dividend income up to $3,000 by the end of 2017. By doing so, it would all but guarantee earning $3,000 in dividend income in 2018.
Note – Our total dividend income will not reach $3,000 by the end of 2017. We will likely earn close to $2,400 … or at least that is our goal. Our forward 12 month dividend income is what we are trying to increase.
So in order to reach this goal, we are focused on investing a good portion of our income each month. Here is a recap of our August results of growing our dividend income.
Grow Our Annual Dividend Income – $3,000
We have a goal (set back in October/November 2016) to grow our forward 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.
New investments is where the majority of our increases will come from.
August 2017 New Investments
Instead of tracking our savings each month, we will track the investments we are making. I never (ever) want to let our savings sit idle and would rather our dollars be working for us to generate more income.
Tracking our investments will give a snapshot of how close we are to raising future annual dividend income to $3,000 by the end of 2017.
During August, we invested new money into 4 different stocks.
Note – All stocks bought in August did not have any commissions or fee’s charged as we used our zero cost broker and third party transfer agent – Robinhood and Amstock.
The following list shows stocks we purchased in August and the amount of future dividend income it will produce. In total, we invested money into 4 different stocks. There were no new companies added to the portfolio, so instead we added shares to existing companies we owned.
- $50.00 in Cincinnati Financial (CINF) – $1.29 annual income
- $70.63 in Kroger (KR) – $1.50 annual income
- $124.05 in Omega Healthcare Investors (OHI) – $10.24 annual income
- $106.08 in Qualcomm Inc. (QCOM) – $4.56 annual income
Note – We did not sell any stock during August.
After calculating our new purchases, we invested $350.76 in new money in August. This has increased our net forward annual dividend income by $17.59.
The yield on cost for these new investments is 5.01%.
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.
During August, we invested ($1,079.24) less than our monthly goal ($350.76 – $1,430.00). After falling behind at the start of the year, we were able to catch up during April by investing our tax refund.
We kept the momentum up in May and June and fell short in July. Unfortunately, August has been our worst month yet for investing new money into the stock market. A family vacation and some unexpected expenses were to blame for this huge shortfall.
Here is a recap of the monthly totals since we set our goal (November 2016) to reach $3,000 in future dividend income by the end of 2017 –
- November 2016 – $1,091.31 invested ($28.34 future annual income)
- December 2016 – $1,969.28 invested ($70.62 future annual income)
- January 2017 – $600.42 invested ($26.31 future annual income)
- February 2017 – $647.76 invested ($26.06 future annual income)
- March 2017 – $988.23 invested ($27.70 future annual income)
- April 2017 – $4,862.18 invested ($144.60 future annual income)
- May 2017 – $1,232.63 invested ($48.72 future annual income)
- June 2017 – $1,448.59 invested ($49.84 future annual income)
- July 2017 – $694.02 invested ($27.62 future annual income)
- August 2017 – $350.76 invested ($17.59 future annual income)
Total new investments = $13,885.18
Total Future Annual Income Increase = $467.40
Average Yield on Cost (new investments) = 3.36%
Updated Annual Dividend Income Estimates
When we set our original goal back in November (2016), our estimated annual dividend income was $2,100. So … we will need to increase this amount by $900.
At the start of August, our estimated annual dividend income was $2,685.35. The goal by the end of 2017 is to push this number up to $3,000.
Our updated annual dividend income estimates at of the end of August rose to $2,705.56. That is a $20.21 increase since last reporting.
August 2017 – Forward Annual Dividend Income Est. = $2,705.56
Most of the increase was a result of the new investments we made in August. The remainder of the increase came from reinvested dividends. For the first time in awhile, we did not have any company dividend increases.
Remember … dividend income will grow from 3 different sources
- Reinvested Dividends
- Dividend Increases
- New Investments
On average, we need to try and increase our future dividend income by $64.29 each month. In 10 months, we have increased our future dividend income by $605.56. We are now down by $37.34.
Unfortunately, August was our worst month yet for investing new money … since we started tracking this last November. It was just a very disappointing month and one that will likely cause us to come short on our goals.
All is not lost however. We still managed to invest $350 into new shares and increased our future income. Even though it wasn’t a huge amount, we still grew our future income and that is really what counts.
The good news is that we still have 4 months left this year to make up some ground … although it will be difficult for sure.
We need to continue focusing on keeping our savings rate (aka investing rate) above 20% of our income. If we are able to achieve this, then we could come close to hitting $3,000 in future dividend income by the end of 2017.
It all comes down to deciding what is more important and what we want to afford. We will need to make some sacrifices to our current lifestyle, but I believe that is worth accelerating our future dividend income.
Do you invest 20% of your income? Are you looking for opportunities to cut expenses or increase your income in order to invest more? What strategies are you using to invest more of your income?