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At the conclusion of every month, I publish an update of our dividend income portfolio.
This portfolio of “mostly awesome” stocks currently consists of 35+ publicly traded companies and is part of our long term financial independence (FI) plan.
One day in the future, my wife and I plan to use our dividend income stream to help offset some (not all) of our monthly expenses.
For example, this year we are expecting to earn close to $6,700 of dividend income. That amount would make 6 of our monthly mortgage payments each year. Plus a little bit extra to help pay for some utility bills.
That kind of passive income is cool, but it doesn’t get us all too excited just yet. What does get us excited is the potential for future growth of this income stream.
Based on some back of the envelope calculations, we expect our dividend income to double every 9 years (or so) if we were to leave it alone.
So in less than 10 years, we should be earning $14,000 annually in dividends. That would be enough to cover all 12 of our mortgage payments in a single year! And we’d have almost enough to pay the following month of January too … just for fun.
Then in 18 years from now, our dividend income will be earning us $28,000 per year … which would cover 47% of our overall spending. This is based on our current spending of $60,000 per year.
Finally, in 27 years … our dividend stocks will be earning us $56,000 per year which would pay for 93% of our current spending.
We do realize that waiting around 27 more years (or even 18 for that matter) to leverage our dividend income stream is not very practical. But using our dividend income in another decade to cover almost 25% of our expenses is.
And even better … is knowing that we can also take steps to lower our annual spending (currently at $60,000) to accelerate this plan.
So … today we are reporting our latest dividend income results.
October 2018 Dividend Income – $338.61
Here is a breakdown of how we earned over $330 last month in dividends … which is the equivalent of one of our monthly car payments + a bit leftover.
October 2018 Dividend Breakdown by Company
Overall, we had 9 stocks pay out a dividend in October, along with our favorite bond fund and ETF.
Just like the past 9 months of 2018 … we earned dividend income in both our taxable and tax deferred accounts.
Fantastic dividend paying companies like Cincinnati Financial, Genuine Parts Company, and SYSCO paid our 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 October from our taxable accounts.
The following stocks are held in our Robinhood, Fidelity, and Computershare accounts that will be reported as income earned in 2018.
- Best Buy Co. (BBY) – $4.63
- Cincinnati Financial Corp. (CINF) – $50.42
- Cisco Systems Inc. (CSCO) – $28.05
- Genuine Parts Company (GPC) – $7.20
- The Coca-Cola Co. (KO) – $6.10
- Altria Group Inc. (MO) – $12.00
- Realty Income Corp (O) – $19.85
- SYSCO Corp. (SYY) – $11.79
- Vanguard Total Stock Market ETF (VTI) – $5.71
October 2018 Taxable Dividend Income = $145.75
Here is the breakdown of dividend income (by stock) in October from our tax deferred accounts. This includes a Rollover IRA we recently built out from several past employer retirement accounts.
- Cardinal Health Inc. (CAH) – $48.76
- Genuine Parts Company (GPC) – $25.60
- Altria Group Inc. (MO) – $41.31
- Vanguard Total Stock Market ETF (VTI) – $5.06
- Fidelity U.S. Bond Index Fund (FSITX) – $72.13
October 2018 Non-Taxable Dividend Income = $192.86
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.
October 2018 Total Dividend Income = $338.61
Overall, October was a bit low for dividend income compared to past months … but it was certainly expected based on the quarterly payouts of the companies we own.
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.
Even cooler than reporting our dividend income earnings, is tracking our future dividend income growth. We actually track this by reporting our future annual dividend income amount in each of our monthly posts.
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. How cool is that?
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 October from these 3 different methods.
New Capital Invested in October
New investments were limited for October.
Instead, we focused on investing more dollars into building our 457 account through my work. By doing that, we will basically not have to pay any federal tax this year.
We still did manage to invest some money in our other accounts in October. Here are the new investments we made in October in our accounts (taxable and tax deferred accounts) –
- $50.00 automated investment in Exxon Mobil (XOM) – $1.90 in future income
- $98.23 investment in Omega Healthcare Investors (OHI) – $7.92 future income
- $59.88 investment in Realty Income Corp (O) – $2.65 in future income
- $305.06 investment in Vanguard Total Stock Market ETF (VTI) – $6.29 in future income
In addition to adding to our portfolio, we had to sell off some partial shares of stock in order to transfer them to another brokerage. Long story short … but we are trying to simplify our finances by consolidating accounts.
We moved share of Cincinnati Financial (CINF) and Clorox (CLX) from Direct Stock Purchase Plans (DSPP) to our Fidelity Joint Brokerage account. In order to make this move, we could only transfer whole shares … so partial shares had to be sold off.
Based on the following 2 sales, we reduced our future dividend income a bit –
- Sold .141 shares of Cincinnati Financial (CINF) – ($0.30) decrease in future income
- Sold .253 shares of Clorox (CLX) – ($0.97) decrease in future income
Net Future Dividend Income from New Investments and Sales = $17.49
The total net amount of new capital invested in October was – $489.02
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
- June 2018 Investments – $309.30
- July 2018 Investments – $266.77
- August 2018 Investments – $538.58
- September 2018 Investments – $2,278.65
- October 2018 Investments – $489.02
We have a goal to invest $10,000 to $12,000 of new money in 2018 in our dividend stock accounts. So far, we have invested $8,702.11 in our accounts for 2018.
2018 New Investment Total = $8,702.11
There are 2 months remaining in the year to see if we can hit our target!
Dividend Reinvestment’s (DRiP) in October
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 October, we were able to bump our future annual dividend income by reinvesting in the following 6 companies and 1 bond fund –
- Best Buy Co. (BBY) – $0.11 in future income
- Cardinal Health Inc. (CAH) – $1.76 in future income
- Genuine Parts Company (GPC) – $0.74 in future income
- The Coca-Cola Co. (KO) – $0.21 in future income
- Altria Group Inc. (MO) – $2.10 in future income
- SYSCO Corp. (SYY) – $0.23 in future income
- Fidelity U.S. Bond Index Fund (FSITX) – $1.97 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 = $7.12
Company Dividend Increases in October
My absolute favorite way to grow our future income (and the easiest) is through company dividend increases. This is the ultimate passive income opportunity … and every month I get excited when raises start coming in.
October was actually the first month in 2018 that we didn’t get any new company dividend increases. While a bit disappointing, we had been on a huge run so far this year with dividend increases … so that makes it a bit easier.
Future Dividend Income from Company Increases = $0.00
Note – 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 10 months, we have grown our future dividend income by well over $1,340 to $7,343.93!
October 2018 Future Annual Dividend Income = $7,343.93
It would be awesome to continue that awesome pace for the year … 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 $7,343.93 … that would be earned on November 1, 2019.
Take a look at how our income could double overtime –
- 11/01/2019 – Annual Dividend Income = $7,343.93
- 11/01/2028 – Annual Dividend Income = $14,687.86
- 11/01/2037 – Annual Dividend Income = $29,375.72
- 11/01/2046 – Annual Dividend Income = $58,751.44
Our updated figures tell us we should be earning almost $59,000 per year in dividend income by November 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.
October 2018 Dividend Summary
In October, we earned $338.61 of dividend income from our tax deferred and regular brokerage accounts. That is enough money to cover the monthly payment on my car, plus cash to cover my daughter’s gymnastic class each month.
My wife and I have set a long term goal from this dividend income portfolio to cover at least half of our monthly expenses … which right now is about $2,500 (our monthly spending is currently around $5,000).
Our family would have a lot more flexibility knowing half of our monthly expenses could be covered by our passive dividend income stream. That is a very cool feeling.
The goal for 2018 is to earn $6,700 in dividend income from all our accounts. After 10 months, we are still behind the pace we need to be at to hit our goal.
For the first 10 months of the year, we have earned $5,079.25 in dividend income in 2018 (January to October).
In order to hit our annual goal, we will need to earn $1,620.75 in additional dividends over the next 2 months.
That is an average of $810.38 per month. The good news is that our income in December will likely be our highest month ever. But I don’t know if we will get enough dividend income in November to actually hit our goal.
It will come down to the amount of dividends our FSTVX fund ends up paying out.
Finally, we also managed to raise our annual forward dividend income by just over $30 to $7,343.93. 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 finish to 2018!
How was your dividend income in October? 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 – BBY, CAH, CINF, CLX, CSCO, GPC, KO, MO, O, OHI, SYY, 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.