I Love Making Money – The Dividends Are Flowing
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I had a good week in terms of dividends earned. In total I have earned $50.62 in dividends since March 31st. I know what you are probably thinking – that is not a lot of money! I don’t look at it that way.
The way I look at is money that I did not need put too much effort into in order to earn it. Basically, all I did was keep an eye on each stock to ensure there earnings and revenue were going the right way. That is the beauty of earning dividends – they keep coming with very little effort on the investor’s part. The added bonus – because I reinvest these dividends – is that this cashflow acts to compound in my account so that the next time I receive dividends from these stocks I earn a little bit more in passive dividend income. The more this happens, the quicker I will reach my goals.
I earn approximately $990 per year in dividends from my portfolio. That is an approximate yield of about 2.4% on my $40,000 portfolio. Add that to any potential share price appreciation and the returns start to look really good. Of course, if the stock has a few down periods where the stock goes the wrong way, at least I know I can count on those dividends to continue to come in and be reinvested at a reduced share price.
6 Comments on this post
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Adi_None said:
This strategy works great if you have $10k or more to invest in diviend stocks. I just started investing and my portofolio currently is quite small (less than 5k). I don’t think that it would be a good idea to buy into blue chip dividend yielding stocks as the commission fees would kill any gains.
What do you think? Thanks in advance.
April 10th, 2006 at 5:38 pm -
Matt said:
Not to be rude, but a 2.4% annual return seems kind of silly for an investment that involves risk. I can put $40,000 into my savings account right now and have it return 3.06% risk free.
Now, if you are investing for price appreciation (but it sounds like you are investing for dividends), then a 2.4% is nice. But considering your main purpose of investing is for dividends, it seems absurd to take on that much risk for a 2.4% annual return.
If I were you I would start looking at stocks that pay a higher dividend (i.e., on of the Canadian Oil & Gas Royalty Trusts), or if you are happy with a return of
April 13th, 2006 at 12:04 pm -
monarchcrest.blogspot.com said:
Have you looked into the stock ticker, FMN? I have had this for over 2 years. It’s current yield is 6.6% with is all tax-free. When I bought it, it was paying about 7.8% at out over $1.00/share per year, but they dropped their yield about 4 months ago. It’s pays out monthly, so you get about $.07/share per month. It’s price has been fairly stable. The best thing about it is that it’s tax free so if you re-invest everything you don’t have to come out of pocket come tax time.
April 13th, 2006 at 4:37 pm -
Geoff Gannon said:
I don’t think you should be discouraged by your 2.4% yield. I have had pleasant experiences investing in stocks with very high yields and stocks with no yield. In each case, the important questions were what price you bought at and whether the owners’ capital was being allocated in the most rational manner.
The stocks listed in your portfolio aren’t merely paying a 2.4% yield. They are creating value with the earnings you retain. As far as I can tell, you’ve selected stocks with a good record of earning a high return on their retained earnings. Therefore, the dividend income should merely be viewed as a return of excess capital. You’re “look through” earnings in these businesses are much greater.
Think about the stock’s earnings coupon. A bond’s coupon will not grow. Therefore, you are merely comparing initial rates of return when you compare a risk free yield to the dividend yield on your portfolio. Also, your coupon has some built in inflation protection, because you are invested in a lot of asset light businesses with pricing power. No one seriously doubts you could raise the price of each can of Coke another cent or two today. Unforunately, that is not the case in many businesses.
So, you have some built in protection from inflation on your investment. A risk free account does not offer any such protection.
Many long-term bonds are offering no margin of safety after inflation is considered. Provided you buy at sensible prices, your 2.4% yield is certainly no more risky than buying a long-term government bond at current yields.
May 9th, 2006 at 6:06 pm -
Scrooge said:
I have invested in domestic and foreign dividend stocks,after having read various books on the subject. I have been investing for 7 years in Dividends stocks. I can make the following generalisations:
1) Agricultural and commodity stocks are cyclical and dividends can range from 0 to 15% depending on if it is a good or bad harvest / and the demand for the end product. There is almost nill capital growth in this sector, but income can be quite good. (Note, obviously, if you buy at the bottom of the cycle, when the company is in loss, capital growth may occur)
2) Utility stocks such as water and electric allways seem to pay,and generally have good capital gains.
3) Emerging markets are no riskier than the USA.
4) Shipping seems to pay good dividends and they are often tax free.
5) If the government owns part of the company, this is a good sign, as ussually the government will ensure a monopoly / friendly business environment will exist.
6) Chasing big fat dividends (being too greedy), often results in disappointment. For example, recently I invested in some subprime stocks, and the big profits soon turned to losses and capital destruction.
7) Good dividend paying companies, seem to get bought over quite frequently. yes, you ussually get a premium at the takeover, but, sadly, you lose a good income stream.
March 24th, 2007 at 3:17 pm -
Bill Koelpin said:
Yes these are all good points but if you are a dividend investor you want:
High Div Yield
High Div Growth
High Cap Appreciation
DiversificationAnd to balance all of these in your portfolio
Take for example BAC or MO they have great yields growth and cap apprecation. Or PGH or PWE great Yields up to 15%!
Do you guys suggest any specialized dividend sites to get dividend data from?
April 9th, 2007 at 2:53 pm
