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The path to financial independence (FI) for my family is dependent on several different factors.
First … we need to continually work on lowering our expenses. Our current yearly spending (for a family of 5) is just slightly under $60,000 per year. That spending includes our normal day to day living expenses like food and gas for our cars. It also includes our mortgage, car payments, and more.
Based on living expenses of $60,000 per year, we would need to accumulate $1.5 million of assets in order to hit the 4% rule. Of course, if we could lower our spending to $50,000 a year … then we wouldn’t need as much ($1.25 million). As you can clearly see … the lower our expenses, the less money we need to reach FI.
Hitting financial independence isn’t only about how much we spend either. It is also important for our family to focus on building additional passive income streams. Ideally, any passive income stream that we create would be recurring (and grow every year) and could be use to help pay for our expenses.
Without a doubt … our most successful attempt at building a sustainable passive income stream so far has been from dividend paying stocks.
We have been working on this source of income for the past 10 years and will earn close to $6,700 in dividend income in 2018. The awesome thing is we did very little work to earn that income this year.
For the past couple of years, we have been reporting our dividend income so that we can track how close we are getting to our goals. Today, we are reporting our May 2018 dividend income results.
May 2018 Dividend Income – $418.70
Here is a breakdown of how we earned over $400 last month in dividends.
May 2018 Dividend Breakdown by Company
Overall, we had 11 stocks pay out a dividend in May, along with our favorite bond fund. As always, we earned dividend income in both our taxable and tax deferred accounts.
Awesome dividend paying companies like Lowe’s, Clorox, and Procter & Gamble wrote my family a check (well not exactly a real check) for simply owning shares in their company.
Here is the breakdown of dividend income (by stock) in May from our taxable accounts. These include stocks held in our Robinhood, Fidelity, and Computershare accounts that will be reported as income earned in 2018.
- Apple Inc. (AAPL) – $9.60
- Caterpillar Inc. (CAT) – $15.60
- Clorox Co. (CLX) – $33.36
- CVS Health Corp (CVS) – $3.50
- Hormel Foods Corp (HRL) – $2.06
- Lowe’s Companies Inc. (LOW) – $10.57
- Realty Income Corp (O) – $17.56
- Omega Healthcare Investors (OHI) – $61.38
- Procter & Gamble (PG) – $13.86
- Verizon Communications (VZ) – $17.28
May 2018 Taxable Dividend Income = $184.77
Here is the breakdown of dividend income (by stock) in May from our tax deferred accounts. This includes a Rollover IRA we recently built out from several past employer retirement accounts.
- Apple Inc. (AAPL) – $18.32
- CVS Health Corp (CVS) – $75.47
- Hormel Foods Corp (HRL) – $18.86
- Lowe’s Companies Inc. (LOW) – $20.58
- Williams-Sonoma (WSM) – $32.25
- Fidelity U.S. Bond Index Fund (FSITX) – $68.45
May 2018 Non-Taxable Dividend Income = $233.93
Note – All of the dividends we currently receive are reinvested into new shares of the same stock using DRiP regardless the type of account. The only exception right now are any dividends received in our Robinhood account. They currently don’t offer DRiP, but at some point all the funds we earn are invested back into shares of a dividend stock.
May 2018 Total Dividend Income = $418.70
Growing Future Dividend Income
One of my absolute favorite personal finance tasks to do each month is to update the dividend income we earned in our tracking spreadsheet. It is an awesome feeling 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.
Besides reporting our dividend income earnings, we also like to track how we grow our future dividend income. We actually track this by reporting our future annual dividend income amount.
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 is 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.
Of course this calculation assumes the company’s 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, dividend reinvestment’s (or DRiP), and company dividend increases. Let’s take a look at how we grew our dividend income in May from these 3 different methods.
New Capital Invested in May
We didn’t invest a lot of new money in May.
Here are the new investments we made in May in our accounts (taxable and tax deferred accounts) –
- $50.00 automated investment in Exxon Mobil Corp. (XOM) – $2.13 in future income
- $257.00 investment in Realty Income Corp (O) – $13.17 in future income
- $50.00 automated investment in Cincinnati Financial (CINF) – $1.51 in future income
- $100.00 investment in Vanguard Total Stock Market ETF (VTI) – $1.67 in future income
Future Dividend Income from New Investments = $18.48
The total amount of new capital invested in May was – $457.00
Here are the new investment totals for the year –
- January 2018 Investments – $189.57
- February 2018 Investments – $373.94
- March 2018 Investments – $231.72
- April 2018 Investments – $3,567.56
- May 2018 Investments – $457.00
Note – all new investments in April were made from a bunch of our federal tax refund in case you are wondering why the big jump that month.
We have a goal to invest $10,000 to $12,000 of new money in 2018. So far, we have invested $4,819.79 in our accounts for 2018.
2018 New Investment Total = $4,819.79
Dividend Reinvestment’s (DRiP) in May
Most of the stocks we own are setup to reinvest the dividends back into more shares of the stock. A few exceptions include any stocks we own in our Robinhood account.
In May, we were able to bump our future annual dividend income by reinvesting in the following 7 companies and 1 bond fund –
- Apple Inc. (AAPL) – $0.44 in future income
- Clorox Co. (CLX) – $1.06 in future income
- CVS Health Corp (CVS) – $2.19 in future income
- Hormel Foods Corp (HRL) – $0.39 in future income
- Lowe’s Companies Inc. (LOW) – $0.71 in future income
- Procter & Gamble (PG) – $0.54 in future income
- Williams-Sonoma (WSM) – $1.14 in future income
- Fidelity U.S. Bond Index Fund (FSITX) – $1.83 in future income
Note – Dividends earned from stocks we own in our Robinhhood account were not directly reinvested through DRiP. Any dividend income earned throughout a given month from Robinhood will eventually be reinvested at some point.
Future Dividend Income from DRiP = $8.30
Company Dividend Increases in May
My absolute favorite way to grow our future income (and the easiest) is through company dividend increases. This is the ultimate passive income opportunity in my opinion.
The month of May had increases from a couple dividend companies we own shares in … Apple and Cardinal Health.
Here are the companies that announced dividend hikes in May that we own shares in –
- 15.9% increase from Apple Inc. (AAPL) – $15.30 in future income
- 3.0% increase from Cardinal Health Inc. (CAH) – $5.60 in future income
Future Dividend Income from Company Increases = $20.90
Note – In addition to our May increases … January started out with 6 dividend hikes, February had 8, March with 3, and April with 4 … which has provided us with an awesome boost so far in 2018.
It is because of these company increases that our dividend income stream will continue to grow every year … even if we never invest another cent.
Total Future Annual Dividend Income
We started the new year (2018) with a future annual dividend income total under $6,000. In just 5 months, we have grown our future dividend income by well over $1,000 to $7,001.09!
May 2018 Future Annual Dividend Income = $7,001.09
It would be awesome to grow our future dividend income by another $1,000 for the remainder of the year (7 months) … but that would be a little difficult I think.
The Rule of 72 Projections
At the beginning of this year, I started publishing the rule of 72 projections for future dividend income in our monthly reports. For more information about the rule of 72, you can check it out here. Basically, it is a calculation that shows how often your investments will double.
Using the rule of 72, I have calculated (conservatively) that our dividend income will double every 9 years … without doing anything. Based on this, I can calculate out how our dividend income could grow (and double) based on our future annual dividend income number of $7,001.09 … that would be earned on June 1, 2019.
Take a look at how our income could double overtime –
- 06/01/2019 – Annual Dividend Income = $7,001.09
- 06/01/2028 – Annual Dividend Income = $14,002.18
- 06/01/2037 – Annual Dividend Income = $28,004.36
- 06/01/2046 – Annual Dividend Income = $56,008.72
Our updated figures tell us we should be earning over $56,000 per year in dividend income by mid-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 some of this income is in retirement accounts that can’t be accessed until a certain date, while other assets are in taxable accounts.
May 2018 Dividend Summary
In May, we earned $418.70 of dividend income from our tax differed and regular brokerage accounts. While that kind of money won’t cover all our monthly expenses … it would be enough to make my car payment, plus a few utility bills. I am looking forward to the day (which isn’t too far off) where our monthly dividend income “could” cover our mortgage payment!
Our goal for 2018 is to earn $6,700 in dividend income from all our accounts. After 5 months, it appears we are slightly behind the pace we need to be at to hit our goal.
For the first 5 months of the year, we have earned $2,312.98 in dividend income in 2018 (January, February, March, April, and May).
In order to hit our annual goal, we will need to earn $4,387.02 in additional dividends over the next 7 months. That is an average of $626.72 per month. The good news is that our income will have time to compound a little before we reach the end of the year. Plus all the new investments we made this past month (and earlier in the year) will start earning dividend income. And we still have 3 big dividend paying months to go this year – June, September, and December.
Not only did we post solid dividend income results in May, we managed to raise our annual forward dividend income by almost $50 to $7,001.09. This is basically the dividend income we would expect to earn starting today over the next 12 months … without doing anything.
I look forward to a very strong June and the second half of 2018.
How was your dividend income in May? 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 the following stocks and funds noted in this post – AAPL, CAH, CAT, CINF, CLX, CVS, HRL, LOW, O, OHI, PG, WSM, VZ, XOM, VTI, and FSITX. The material above is not a recommendation to buy. Please do your own research on a company before deciding to invest.