As many of my readers may know, I love dividend stocks and believe dividends provide a great source of passive income. Quarterly, I provide updates regarding my dividend income, dividend goals and if I buy dividend stocks.
Using ‘The Dividend Report‘ section of my blog, I share the progress of my goals. I also share dividend growth stock ideas and thoughts. Additionally, I will share the rationale behind any future purchases or sales. Dividends are truly a wonderful thing.
The Dividend Report
For over two years, I have been working towards the same goal. I want my average dividend income to provide $1,500/month. As I solidify my path to financial independence, I want dividends to be 25-33% of my monthly retirement income. This goal may be revised upwards over time. I track my dividend income with Personal Capital and store the data on a Google Sheet.
In case you were wondering, real estate provide the rest of my retirement income.
Q4-2018 Dividend Income
I’m pumped to share this dividend report with you. Quarter 4 of 2018 (Q4) marks the end to another year. This means a lot of things.
I now have 6 years of dividend data! I cannot believe I’ve been tracking my progress for so long. It’s fun to watch the progress I’ve made over time.
My portfolio also generates the most income in Q4. A few of the funds I own pay larger dividends at the end of the year in addition to their regular payment.
This was a great year for my dividend income as many of my stocks’ increased their dividends as well.
The graph below shows my dividend income history since 2013:
The table below shows my dividend history since 2013:
2017 Dividend Income vs 2018 Dividend Income
This year my total dividend income was $4,990.77. Last year, in 2017, I made $3,651.28 from dividends. That means I made $1,339.49 more this year from dividends. This is a 36.7% increase; I am pleased with my growth. The best part? I sat on my butt and didn’t need to lift a finger to earn an extra $5k.
There are three main reasons for the increase. First, I maxed out my 401k for the third year in a row. Regularly contributing to a 401k is one of the 6 steps to a 6-figure net worth.
Second, I continued buying index funds every week in a brokerage account and opportunistically bought dividend growth stocks.
Third, 18 of my 19 stocks increased their dividend payout. This means each share I own now pays me more for owning the same great company. How awesome is that? We will dive into this in greater detail.
The table below summarizes the increase in individual dividends for the past few years:
As you can see in the table of above, many of the stocks increased their dividends by a large percentage. In fact, most increases were well above inflation (AT&T, Allergan, BP, and Verizon being the laggards). This means even after inflation I am earning more every year. Dividend growth stocks provide many benefits.
Oh, and the astricts next to GLOG is meant to indicate the stock provided a special one-time dividend of $0.40 per share in addition to its regular dividend payments.
My average monthly dividend income is now $415.90 ($4,990.77 / 12 months = $415.90), which is 27.73% of my goal of $1,500/month.Previously I was at 20.28% of my goal. I hope to build off this success and get even closer to my goal in 2019. Last year, I shared my stretch goal with you – this was to hit my goal of $1,500/month by the end of 2019. Candidly, this will be near impossible. However, I will continue to offensively build wealth and invest regularly.
This quarter vs. last quarter
My Q4-2018 dividend income was $2,458.38. Last quarter (Q3-2018), my income was $1,051.55. This is a $1,406.83 or 133.79% increase from the previous quarter. The large increase is misleading for a few reasons. A handful of my funds do not pay a dividend in Q3. As a result, the same funds pay (multiple) dividends in Q4. Some of the funds also provide a larger dividend in Q4.
Q4-2018 vs Q4-2017
Last year’s Q4 dividend income was $2,092.46. This quarter I earned $2,458.38. This is $365.92 or 17.49% more compared to the same time period last year. Imagine if your job paid you 17% more this year.
New Purchases
I made three individual stock purchases in Q4-18. As many of you were probably aware, the market experienced extreme volatility at the end of 2018. I found this as a nice Christmas gift to long-term minded investors.
AT&T – As I mentioned in the last Dividend Report, I was interested in AT&T. Well, the market continues to bash the telecom giant. Shares continued to tumble in the 4th quarter. As a result of the declining stock price, shares of AT&T yield almost 7.0%. This dividend caught my eye.
I spent a lot of time sifting through the company’s earnings reports. I extensively analyzed their balance sheet, statement of cash flows, and debt schedules. The many are worried about the company’s ability to repay/pay down their debt. AT&T’s dividend payout ratio is approximately 58%. This means the company has almost 40% of the free cash flow to pay down debt or invest back into the company. Management has stated their intentions of deleveraging the company. The company also stated during their last earnings report that they expect a modest increase in free cash flow.
I am willing to ride out the storm with AT&T. I believe their recent acquisition of Time Warner (now referred to as Warner Media) will provide organic growth. The telecom giant has morphed into more than just a phone company. I believe they will play a pivotal role in the ‘Streaming Wars’ with Netflix, Disney, Amazon, and others. Likewise, AT&T also has strong potential for international growth (mostly Central America).
I bought 200 shares of AT&T during Q4.
MSFT – Microsoft. This is probably a name that everyone knows. Tech companies were among the hardest hit names during the recent market decline. Mircosoft is one of the best technology companies out there. They are also a leader in the cloud space. The company has excellent management, a great balance sheet, and well position for the future.
I purchased 10 shares in the mid-90s during the recent pullback. The stock quickly rebounded but would like to add more on any pullback.
AMZN – Amazon. If you don’t know this company you probably live under a rock. Amazon is a company that needs no introduction. The company is everywhere, growing like a weed, and disrupting several industries. The company does not pay a dividend and may not pay a dividend for a long time. This, as you may know, is a deal killer for me. The stock was trading over $2,000 a share in 2018. During the fourth quarter pullback, the stock briefly dipped below $1,400/share. I believe in the long term viability of the company, their ability to increase revenues, and earnings. I do not like owning stocks that do not pay a dividend. However…
I purchased 1 share of Amazon. Let the good times roll.
Nice job on the dividend income!
Amazon’s one of only two stocks I bought at the right time back when I would by individual stocks… I bought it at $67. Unfortunately, I only bought 13 shares, but it’s still a win for sure! The other was Google they I bought 2 shares of at $624/share before it had split. Another good win, but I’ve had plenty of losses as well.
— Jim
Nice job! Drew, I’m curious as to what your ratio between index funds and dividend producing stocks are. Seems like a lot of work to allocate to both as opposed to going all in.
As of today it’s 32% individual stocks and 68% index funds. This is not a targeted allocation and I expect it to ebb and flow over time. Index fund purchases are automated. I buy in a brokerage account every Monday. 401k buys index funds when I get paid every two weeks. Individual stock purchases occur when I have capital to invest AND when I see opportunity to buy undervalued stocks.
What brokerage do you use?
I spread things around. Fidelity provides a great experience. Vanguard funds are excellent but their interface is clunky. E-trade has awesome research tools. Can’t go wrong with most brokerages these days. Look for one that provides low cost index funds and low or no trade commissions.