How to Grow Dividend Income – February 2017 Updates
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For almost 9 years now, my wife and I have been slowly building up our dividend income portfolio.
We currently own over 30+ stocks that pay us dividends.
Just last year (2017), we earned $1,918.16 in dividend income. While we are very happy with those results, our goal is to continue growing this income stream.
So … we set a goal to increase our future dividend income up to $3,000 by the end of 2017. By doing this, we can almost assure ourselves of 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.
Here is a recap of our February 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.
February 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 February, we invested new money into 8 different stocks. We purchased 5 stocks in our LOYAL3 account (AAPL, BBY, DPS, TGT, and VFC), 2 stocks in our Robinhood account (CSCO and OHI), and 1 through a direct stock purchase plan (CINF).
By using those brokers and accounts … we did not pay any commissions or fees on these transactions.
Try and pay close attention to the “annual income” numbers I have provided. This income represents our estimated dividend income increase for the next 12 months.
- $150.00 in Apple Inc. (AAPL) – $2.51 annual income
- $25.00 in Best Buy Corp. (BBY) – $0.62 annual income
- $50.00 in Cincinnati Financial (CINF) – $1.36 annual income
- $67.46 in Cisco Systems (CSCO) – $2.32 annual income
- $25.00 in Dr Pepper Snapple (DPS) – $0.62 annual income
- $155.30 in Omega Healthcare Investors (OHI) – $12.40 annual income
- $150.00 in Target Corp. (TGT) – $5.44 annual income
- $25.00 in VF Corp. (VFC) – $0.79 annual income
If you would like to see additional detail of our purchases and our dividend income, check out our February 2017 results.
Overall, we invested only $647.76 in new shares of stock in February. This has increased our forward annual dividend income by $26.06.
The yield on cost for these new investments is 4.02%.
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 new investments rose just a little in February (compared to January). We had a lot of holiday related expenses that carried over, a new car to start paying for, and homeowners insurance was due.
During February, we invested ($782.24) less than our monthly goal ($647.76 – $1,430.00). We plan to make up for a lot of this difference later this spring when we receive our tax refund and invest all of it.
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)
Total new investments = $4,308.77
Total Future Annual Income Increase = $151.33
Average Yield on Cost (new investments) = 3.51%
Note – We are now ($1,411.23) behind our investment goals.
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 February, our estimated annual dividend income was $2,267.02 (after January investments). The 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 February rose to $2,309.05. That is a $42.03 increase last month.
February 2017 Annual Dividend Income = $2,309.05
Of the increase, $26.06 was a result of the new investments we made. The remainder of the increase came from reinvested dividends and company dividend increases – which there have been several recently.
- Reinvested Dividends
- Dividend Increases
- New Investments
On average, we need to try and increase our future dividend income by $64.29 each month. In 4 months, we have increased our future dividend income by $209.05. We are behind by ($48.11) … which means we have lots of work to do.
We need to start focusing on increasing our savings each month, now that the holidays are over and we have more leftover in our paychecks. More savings = more investment dollars.
March and April will be a better months than January/February. Once we get past our large home owners insurance bill, we should be able to ramp our savings up.
Plus in a few months, we plan to invest $5,000 of our tax refund (which we typically do each year). This should help to offset any future shortfalls we may have.
After that it is up to us to kick it into gear. Hopefully we can start generating some side income … which we could then use to invest.
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?
Full Disclosure – At the time of this writing, we owned shares in the following stocks noted in this post – AAPL, BBY, CINF, CSCO, DPS, OHI, TGT, and VFC. The material above is not a recommendation to buy. Please do your own research on a company before deciding to invest.