Dividend income, it’s amazing!
Seriously, as I progress in my financial independence journey and keep on executing on my financial strategy, I become increasingly convinced that dividend income is what keeps me on course. My monthly PAY MYSELF FIRST differ and stock prices love irrational ups and downs, but dividends from my investments in stocks or ETF’s are something you can count on – month after month.
After my divorce where I lost more than 30% of my net worth, I decided that I would recover from my biggest financial mistakes from the past 15 years during my marriage. My biggest advice is that you should only marry someone with the same financial goals as you. Never marry somebody who wants to put you in continuous or large debt no matter how much you love her. Read this CNBC article on why money can bust your relationship.
In 2013 I worked out a new financial independence strategy that I have been applying more than 3 years now. We started with very small amounts in 2014 similar like our kids portfolio and we are still completely debt free.
Today you can read my first 2017 passive income Report Out of my own personal portfolio.
Market Analysis
During the time frame March – November time frame, the US stock market was moving within the range of 202 – 218 range. This was the time frame before the US election and a lot of uncertainty was occurring amongst the investors. Once Trump was elected as president of US, everyone in Europe expected a major sell-off. Analysts of commercial banks were predicting the worst for the stock markets. We know Belgian investors who sold their complete portfolio to avoid losses….crazy how emotions let investors do stupid things. We just waited and watched as we didn’t expect this sell-off at all and noticed the break of the trend just after the elections. As you can see in the graph, the stock market boosted from 212 to 225 in just 2,5 months.
On the 25th January the DOW hit a record of 20.000 points. Never seen before in history…
Now you will say what can I learn from this? Why would I buy stocks so high? Read and learn…
During the period of uncertainty in the stock market and lack of direction, we accumulated our pay ourself first payments (read our Financial strategy if you don’t understand) and mainly our dividend income from August to November 2016. When we saw the market break the trend and break through 218 level in December, we didn’t doubt and purchased new shares and ETF’s. We accumulated our dividend portfolio with 3 different monthly stocks and 1 new quarterly dividend paying ETF with the available cash we had. We also increased our position in one monthly dividend payer that we already had in our portfolio for several years. Now let’s dive into some numbers to see how our passive income performance worked out.
Dividends received in January 2017
All dividends are listed in Dollars as my investment portfolio is mainly invested in US Stocks and ETF’s mainly. The exchange rate of the Dollar towards the Euro was stable and the dollar did get a bit stronger over past weeks. Nothing we are worried about. We invested in dollars at the 1.4, 1.3 and 1.2 Euro mark. And we are here for the long term, we don’t care about the currency exchange rate. We only care about the cash flow.
January has been a RECORD month of passive income with a total of 1530$. Thanks to our December purchases and decision making, January dividend income has doubled compared to January 2016. Freaking AMAZING !! This exceeds the rent of the house we live in and our food expenses for the month. It strengthens our belief that we are on the right track for financial independence. Let’s analyze in detail the payouts.
During the year 2016, we had several months where we hit more than 900$ passive income. In January 2017 we broke through that 1.000$ level. All this passive income will be re-invested in the portfolio to accelerate the effect of the compound interest. If you don’t know or understand the beauty of this compound interest, we really recommend you to read the following two older blog posts.
Get the Basics : Understand the Golden Rule of Compound Interest
Get rich at your retirement – Learn how?
Now let’s analyze the breakout of monthly versus quarterly paying dividends.
We earned a monthly dividend income of 213$ versus a quarterly dividend payout of 1300$. This 213$ is below our 2016 yearly target of 2016. We have set 300$ per month as our yearly 2017 goal and that will be our next focus. We will investigate which monthly dividend payers (safe high dividend stocks or ETF’s) that deserve a place in our dividend cash factory.
Growth
Compared to last year, January’s income grew by a nice increase of 99% compared to January 2016 and 58% compared to the October 2016 dividend income. A very solid growth and jump start for my 2017 goals. I’m really pleased with this first record 1000$+ figure month in the books.
Going forward
We are now entering February 2017. In this month we will focus on the new Belgian tax regulations as the Belgian government decided to take out an additional 5 % of my dividend payout. Read all about it in who is stealing our money blogpost. We will also prepare our City Break goal in 2017 and investigate new monthly dividend payers’ purchases. Now that we have new cash available, we look to add to our current portfolio or invest in bigger paying opportunities. We won’t have quarterly paying stocks or ETF’s in February. So our passive income will be substantial lower.
Our goal for our monthly dividend payout is 300$ per month and we are 87$ away from hitting this 2017 objective.
Why do we like the boring and recurring nature of dividend income? Well, there’s two very good reasons.
First, every time a dividend payment hits my bank account we are filled with joy that we made money without having to lift a finger. While we were sleeping, going out with friends, horse riding or working in our job, the dividend comes in month after month. Basically different companies all around the world working to make profits and then forward us a piece of their profits. It’s a great recurring stimulus.
Second, we can take advantage of the double compounding effect. On the one hand we get to see how these dividends increase year after year, semi-automatically almost, while on the other hand we get to put fresh income immediately to work in the stock market again. As a result, we accelerate our passive income forward faster and faster as we progress. If you read the above two older blog posts, you understand what we mean. You learned an important financial lesson then, congrats to you!
Once that passive income surpasses each month our monthly expenses our family will be effectively financially free and we could potentially retire early.
So we just do the rational thing – even though some might consider it insane because it’s very repetitive: paying yourself first in the beginning of the month from your salary and investing those savings for the future. Money has the awesome property to turn into more money if you put it to good use, so you can bet on it that we aim to do just that. Some people just want to pay the bills and see how they can spend the left over…it’s a choice in life that each person makes for himself and his family. No judgment from my side.
How was your month in terms of dividends? Are you still the (stupid) European or Belgian who puts all his money on a bank savings account? It is your choice but you get poorer every day…did you know that the inflation increased to 2,65% in January 2017 taking a bigger bite out of your savings. We suggest you do the following exercise for yourself. Calculate how much savings money you need on a 0,11% interest rate of a savings account to make in one year what I made in the January 2017 month alone. You will be astonished. Simple math you learned in high school…
Good luck with your personal finance strategy!
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