A Stock Dividend Plan for 2012

As promised, I wanted to take a look at and share with you my stock dividend plan for 2012.  This is for my retirement accounts which are individually directed but aren’t receiving any additional funds.  My future retirement deposits are being made in my new 401(k).  As I had mentioned, the plan was to increase my dividends to $1000 per quarter, but I think that it will happen in this last quarter of 2011 so a set of new goals will have to be made.  Once I share these, I will explain how I plan on meeting those goals in the upcoming year.  I feel this is a valuable exercise since eventually my retirement plan is to live off dividends and real estate rental income without touching the principal.  Of course, I will also insist on being debt free prior to retirement.

New Dividend Goals for 2012

I plan on shooting for $1500 in the first quarter and increasing that total by $300 per quarter through the end of the year.  That means $1800 for the second quarter, $2100 for the third quarter, and $2400 for the fourth quarter which breaks down to $800 per month on average.  Some of these numbers seem doable, but others seem like a stretch.  Of course, I will only know as I make the necessary adjustments and track the results periodically.  So, how do I plan on achieving these goals.

Current Stock Holdings

Right now, I hold the following shares:  SLW, AKS, SDRL, ONXX, DRYS, AKAM, STX, INTC, GME.

Of these, ONXX, DRYS, AKAM, and GME do not pay out any dividends.  The first part of the plan will be to replace several of these with stocks that do pay out dividends.  I recently bought some shares in STX and will buy some more once AKAM ends up being called away.  As you may know, I do sell covered calls on many of the stocks that I hold and AKAM could be called out this Saturday when expiration arrives.  It will be called away at a profit so I am not upset with allowing it to go.  This means that AKAM will be replaced with STX.

ONXX is being shopped around and made a nice run recently.  I want to work with it a little more and increase my profits by selling some January calls.  Ultimately the plan will be to replace those shares with Nucor (NUE) since I will be getting rid of AKS.  Even though AKS pays out a dividend, it is not as much as the Nucor dividend.  This is the second part of the plan, namely replacing the lower yielding stocks with ones that pay out more in the same industry.  With this switch, I will still maintain the exposure to the steel industry for when the world comes out of its slump and inflation rears its ugly head.

GME is also likely to be called away this week assuming European debt doesn’t blow up in the next five days, and I will be using the proceeds to add to my Intel holdings.  I also plan to add to my SDRL holdings with the AKS proceeds when I can manage to exit with a profit.  That might take another month or two.

I will be making no changes with DRYS for the moment since I am really trying to work with the covered calls as part of another technique that I am trying.  Suffice it to say that I could get rid of the stock if necessary to achieve my goals, but now is not the time.

Net Results

All in all, about 36% of my portfolio will be moving from non-dividend paying stocks into dividend paying stocks.  I would expect that by the end of the year, I will be coming awfully close to my goal of $2400 for the quarter.  I hope to generate some more funds for the account by selling covered calls and using the proceeds to add to my positions.  If I can do that, reinvest the dividends, and have some of the companies increasing their dividends next year, it may not be long until I am making over $1000 per month in dividend payments.  Another couple decades of growth should mean that by 2038, I won’t need to worry about Social Security!

Readers:  What do you think?  Does the plan sound reasonable?  Do you have any investment plans for 2012?


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