A Quest for Increasing Stock Dividends
Since I started blogging about financial topics earlier this year, I have been following and reading other financial bloggers as part of the overall community. There are many bloggers that write specifically about stocks that pay dividends, and as a result of following such bloggers, I have found a new interest in the wisdom of investing for yield.
Now I must admit that I knew that historically about half of the performance of the S&P 500 was attributable to dividends but coming out of the greatest bull market in history, it has been difficult to step away from thoughts about growth and capital gains. But now that I am getting older and wiser, I am starting to grasp the need for consistent returns.
I have really enjoyed reading about dividend investing from many of these other bloggers and will list some of them at the end of this post. But in the meantime, I would like to state that I am newly committed to increasing the dividend yield on my retirement portfolio.
Looking at the Past
In order to see where I am going and what goals may be achievable, I need to know where I have been in the past. I took the time to go back over the past 8 quarters and added up my total dividend payments for each of those quarters and included them in the nifty graph below:
As you can see from the graph, my dividends have ranged from a low of $104.78 in the second quarter of this year to a high of $236.07 in the first quarter. This was the result of switching my 401(k) precious metal investment from Goldcorp (GG) to Silver Wheaton (SLW) which pays a lower yield.
I did this since SLW has tended to be a little more volatile in the past which helps to increase the premiums from selling covered calls. However, I am wondering whether or not I should be focused on more consistency.
I still want to have some exposure to the inflation trade since I feel that the amount of liquidity that will eventually flood the system will result in a return of increasing prices. The only question is whether I want that exposure to be through precious metals or energy. Energy stocks tend to have higher dividend yields so I really looking at those.
Looking at the Present
Currently of the 8 stocks that I have in my retirement portfolio, only 4 pay dividends, and one of those was added in the past week (more on that in a future post). Intel was only added in the third quarter so you can see that I haven’t been in many dividend stocks. I think it is safe to say that there is room for improvement in this aspect of my portfolio.
I figure that as I close out current positions which could happen by the end of the year, I will be replacing those positions with new stocks which pay out anywhere from 3-5% in dividends and using my current strategy of selling covered calls to boost the yield.
Looking to the Future
Over the next year, I would like to get the majority of my portfolio invested in stocks that pay dividends and increase my quarterly dividend income to $1000. Ultimately, the plan would be to be able to live off dividends while leaving the principal intact. Now $1000 is not a lot of income for retirement, and I will obviously have to reinvest that money plus the covered call premiums to grow that total. But I do have over 2 decades before I will want to start drawing on that income anyway so I bet I can increase that number.
Obviously, I will have to keep tracking this on a quarterly basis and will do so now that I took the time to enter it all into a spreadsheet where I track my stock basis already. I think that this goal is achievable since even though half the stocks pay quarterly dividends, the yield is fairly low and the proportion of my portfolio in those stocks is less than 50%.
And Now for Those Dividend Bloggers
Here are some of the dividend bloggers that I have been following and using for ideas:
Dividend growth stocks offers 12 blue chips for when the chips are down.
Matt at Dividend Monk analyzes Exxon Mobil.
The dividend pig looks at Microsoft as a potential addition to a portfolio.
Dividend Mantra (love the name) recently added Medtronic.
Finally, Mike at The Dividend Guy Blog offers up tips to reduce volatility.
There are other great dividend blogs out there. Do what I do and read for ideas and invest according to your own criteria.
Readers: What are your thoughts on dividends? Do you intentionally try to increase dividend income like I plan? Do you invest for growth instead? What do you think of my plan? Thanks for reading.
I like companies that offer dividends and I do seek out the ones that do. Not for the income, but it shows the company has an obligation and reduces potential for fraud (ok, I take back fraud considering how many banks were offering dividends!).
But yes, I would choose a dividend paying company over a non dividend paying one any day!
Good luck on your endeavor CFM!
MoneyCone recently posted..Don’t park your cash in CDs until you’ve at least considered this alternative!
Thanks. Paying a dividend consistently over the years is typically a sign of responsible management.
Outside my Ira account I do like to pick dividends stocks in my buy and hold account. I have so far gone with what I know, sre, ge, intc. And been building those. I’m looking to add some more. May not be smart but I’m also considering when they payout. Would like to get it so I earn something ach month, like you hopefully I can live off the earnings
(along with Adsense I hope)
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I would love to have a portfolio large enough to get enough for living each month. Someday in retirement, that is the plan.
Sounds like a great plan! I am steering my portfolio in that direction as well.
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Makes sense if you want to retire by 40.
Thanks for including me. I also like your mantra!
You already know my thoughts on dividends. My whole purpose for investing in dividend growth stocks is to retire and become financially independent by living off the passive income and leaving the principle untouched. I love your goal of increasing your quarterly dividend income to $1,000 from where it’s at now. That would be a huge increase and I wish you all the luck. My goal for next year will likely be to earn $2,000 in dividend income. I think I’ll be able to reach and exceed that goal.
Best of luck in your goal!
Dividend Mantra recently posted..Dividend Income Update – October 2011
You are welcome for the inclusion. I like reading your blog and following your progress. As a result, I know your thoughts on dividends and their purpose. Good luck on your goal for next year as well.
Love dividends in a 401K. I’m tossing around buying another one, but I haven’t made the final decision. Perhaps next week.
What div payers do you hold?
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I am holding INTC, SLW (which just tripled its dividend), AKS (which I might replace with Nucor), and I just bought SDRL. I might be writing about that next week.
What’s your opinion on REITs and other income trusts CFM? Up in Canada REITs get very preferential tax treatment. Their business model looks very sustainable to me, as it is cash-flow oriented. I believe their distribution yields of 7%-10% are sustainable in most cases. Is it worth sacrificing growth potential? I think it is an excellent way to get diversified real estate exposure (much preferable to making a large investment in a rental property).
I think REITs are a good way to get some exposure to real estate, but you want to balance that income with some growth potential as well. I wouldn’t go all to REITs nor all to other stocks. Mix it up with some dividend stocks, energy exposure, real estate, etc.
I’ve only recently started investing in stocks (outside of retirement accounts) and dividends are a big plus for me. I love the fact that they generate income without having to sell them. My long-term plan is to regularly invest each month and re-invest dividends to keep growing. Eventually I’ll start cashing out those dividends and use them as a passive income source.
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You have a great plan there. Keep it up and you won’t regret it.
Energy & Oil technology companies that are raising dividends is a great way to invest on market pullbacks. Here are 3 solid companies raising dividends in January 2012 including Schlumberger, Enterprise Products Partners and Alliant Energy. http://www.bestdividend-paying-stocks.com/dividend-raising-companies-jan2012.html I especially like Schlumberger which is an oil technology diversified play and has return 197% in the last 10 years, just amazing! Enterprise Products Partners has also returned almost 90% in the last 10 years with a solid 5% dividend, I think this is a dividend investor’s goldmine!
Yes, those look like good returns. I have been following SLB for years.
I am a big fan of dividend stocks. Two of my favorites are AT&T (T) and Verizon (VZ). They aren’t high growth stocks but they have paid a consistent 4-5%+ yield for a while now.
Do you have any exposure to those two?
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Personally, I don’t. However, I would consider them while at the same time using options to hedge.