The Predictability And Practicality Of Dividends

drowningcashIn light of some recent minor volatility in the stock market, I thought now would be a great time to revisit the very nature of dividend growth investing and why it’s such a robust strategy for those aiming to one day live off of their growing dividend income.

Now, there are a number of really attractive qualities that dividends feature that make them so wonderful in the first place.

But today I’m going to discuss two great qualities that, in my view, really shine through when the Mr. Market is moody.

Dividends Are Predictable

If someone were to ask me what The Coca-Cola Co.’s (KO) stock price is going to be tomorrow, next week, or next month, I’d have no idea. Could be $39 per share. Could be $41 per share. Or more. Or less.

So what are the odds that I’ll know beforehand what KO will be priced at on October 1st, 2015?

Zero.

But if you were to ask me what Coca-Cola’s dividend will be on October 1st, 2015, I’d know with 100% certainty that they’ll pay out $0.33 per share.

And I’d also know that the odds are very, very strong that Coca-Cola will pay out that same $0.33 in mid-December.

Even better, the odds are also strong that the company increases that $0.33 at a rate above inflation in time for the payment in early April. So that means shareholders can look forward to even more than $0.33 per share next spring.

That’s predictable.

I can basically see into the future by having some certainty in regards to what kind of income my investment will provide me.

It’s that juxtaposition – constantly oscillating stock prices compared to very predictable dividends – that attracts me so strongly to the idea of one day living off of my growing dividend income.

That predictability of dividends works incredibly well in real life, especially in light of the stock market’s behavior recently – behavior that will likely repeat itself every so often over and over again.

And the reason why that predictable nature is so fantastic in real life is because our fixed expenses are also predictable to a large degree.

I know when rent is due and how much it’ll cost me. My mobile phone bill is $25 every month. I have a pretty good idea of how much I’ll spend on food. Internet runs me about $27 per month. So on and so forth.

As such, it’s easy to line up my dividend income with my expenses.

We can all see that I earned $410.52 in dividend income last month. And we can compare that to the $1,745 I had in personal expenses for July. So that means I was able to cover over 23% of my personal expenses via passive income alone.

However, we can also glean two additional key pieces of information here.

First, if I really wanted to, I would have been able to predict that $410.52 ahead of time. I could say to myself in June that I was going to earn more than $400 in dividend income in July. That makes planning for expenses very easy, especially once dividend income is the primary/only source of income down the line. Makes budgeting extremely easy.

Second, I had a very high degree of confidence that I was going to collect that dividend income regardless of the stock market. The market could jump by 5% or fall by 5% and it wouldn’t matter at all to me in regards to what my dividend income was going to be.

This is important once I’m financially independent and actually living off of the dividends my portfolio generates. After all, who wants to worry about stock prices when they’re busy traveling the world, or spending time with loved ones, or pursuing passions? I’d rather just let the dividends roll in and go about my life.

The reason I was so confident beforehand that I was going to collect that income, regardless of the market, is because there’s a second juxtaposition at play here.

A dividend is paid to me as a shareholder directly from and by a respective company. The board of directors at Coca-Cola, for instance, determines my dividend from the KO stock I own. And it’s the profit/cash flow the company generates that determines the board of directors’ ability to pay and increase its dividend to shareholders. So as long as Coca-Cola is earning more money over the long run, my dividend from the company should continue rolling in and growing.

The flip side of that coin is stock prices. Stock prices are absolutely not determined by a company’s board of directors. They’re determined by external forces, supply and demand, rumors, noise, millions of traders buying and selling every millisecond, and robots looking to take advantage of technological advantages, among many other factors.

So would I rather bet my financial independence on robotraders and rumors or Coca-Cola’s ability to sell more Dasani water, Coca-Cola, and Simply Orange to millions of people around the world while simultaneously slowly increasing prices over time?

Indeed.

I can tell you that my portfolio oscillated by more than $15,000 in market value over the last week or so. And we haven’t even really seen that much volatility recently.

But what happened to my dividend income? What happened to the actual number of shares I own in the broad collection of businesses I’ve assembled?

Nothing at all. $15,000 in aggregate stock market value can come and go, but the dividend income tends to just keep on coming.

Dividends Are Practical

One other major reason I love the idea of living off of growing dividend income rather than slowly selling off my portfolio and chopping down my money tree is the practicality of dividends.

The thought of selling off a predermined chunk of your portfolio every month, quarter, or year might not seem like such a bad idea when you’re 40 or 50 years old. But what about when you’re 70? Or 80? or 90 years old? Do you really want to track withdrawal rates and inflation for the rest of your life? Where was I at? 5.2% last year? Okay, inflation is 2% this year… That puts me at… I’m lost.

I suppose a lot of that depends on how mentally sharp you are once you’ve advanced in age, although I’d argue that a year definitely isn’t a year.

But I guess you’d have to ask yourself which you’d rather rely on in old age: dividends or the value of your portfolio?

If you’re going to live off of your investments for decades, your odds of experiencing multiple bear markets increases dramatically. What if you experience one when you’re 80? Do you really want to be thinking about how long your money’s going to last, what kind of adjustments you might have to make to your withdrawal rate, and what the stock market is up to?

The practical nature of dividends extends out living off of them in old age, in my opinion.

Dividends are simply deposited into my brokerage account. I don’t have to do anything for that to happen. I don’t have to follow the market. I don’t have to sell stocks. I don’t have to worry about robotraders and rumors.

And if you’re able to put yourself in a position where you’re living off of growing dividend income at a young age, you have wonderful odds that your snowball will start to roll away from you and create so much passive income that you couldn’t possibly spend it.

If you start living off of, say, $20,000 per year in dividend income at 40 years old (more or less in line with my personal long-term goal), you can assume (using the rule of 72) that dividend income will roughly double every decade if the dividends are increased at a 7% annual rate in aggregate. Based off of my numbers and the long-term numbers of the blue-chip stocks I track and invest in, that seems pretty reasonable to assume. So that means you’re looking at something like $40,000 per year in dividend income at 50. $80,000 in dividend income at 60. $160,000 in dividend income at 70. $320,000 in dividend income per year at 80. Compounding at its finest.

So I guess you look at that and you think about the practical nature of generating income without worry or input, and what I see is a problem where I’m 80 and probably can’t figure out how to possibly spend all of my passive income.

Would I rather worry about actuarial tables and whether I need to adjust on the fly at 80 years old or how I’m going to spend all of my money? Moreover, who cares what stock prices are doing when you have hundreds of thousands of dollars coming your way without having to lift a finger?

Now, a dividend cut or two or three could surely pop up over time. And a company or two could even possibly go sideways or bankrupt on you. Especially when we’re talking about decades here.

But like I’ve discussed before, diversifying your portfolio out over a few dozen or more high-quality dividend growth stocks means that even income loss from a dividend cut or two will quickly become rectified by dividend raises from the other stocks in the portfolio. Furthermore, an investor’s income is not only quickly made whole once again when one has many other companies increasing their payouts, but that income actually increases shortly thereafter. And that’s before factoring in the strong odds that the companies that temporarily experienced enough trouble to cut their dividends later reinstate them at the full amount.

Conclusion

Volatility doesn’t bother me at all. I look at short-term volatility as a long-term opportunity – providing me a chance to possibly buy high-quality assets for less than they’re worth. I don’t view volatility and risk as synonymous.

But volatility bothers me even less when I realize that the dividend income I’ll be living off of is predictable and practical. My portfolio may have swung by well into the five figures over the course of a few days, but my growing dividend income was completely unchanged – stock market volatility and dividend income volatility are also not synonymous. Insofar as it relates to my journey, progress, and success, it’s like the recent volatility didn’t even occur other than to provide cheaper stocks for my current capital.

I feel wonderful knowing that my growing dividend income is completely independent and detached from oscillating stock prices. My ability to achieve financial independence relies on the underlying performance of real-life businesses selling real-life products and/or services – which will fuel growing dividend income – rather than what millions of people and electronic programs think my tiny slices of businesses are collectively worth at any given moment. And I like my chances when I look at the likes of Johnson & Johnson (JNJ), Union Pacific Corporation (UNP), PepsiCo, Inc. (PEP), Walt Disney Co. (DIS), Visa Inc. (V), Chevron Corporation (CVX), and W.P. Carey Inc. (WPC).

My dividend income is almost as predictable as my expenses, and they’re certainly as tangible. That tangible and predictable nature makes it very easy to determine exactly how financially independent I am at any given moment, and where I am along the spectrum of freedom. In addition, I don’t need to worry about the stock market and stock prices and what all of that means for my portfolio value and what I’m able to withdraw at any given time. My rent doesn’t have an electronic ticker that oscillates daily. As such, it’s attractive to rely on an income source that is similarly predictable.

Even better, the dividends are quite practical, meaning that I’ll have less and less to worry about precisely as I potentially become less and less able to handle major financial concerns. If my largest financial concern at 80 years old is how I go about spending $300,000 per year in dividend income, I think I’ll be able to make it.

Full Disclosure: Long all aforementioned stocks.

What do you think? Do you find the predictable and practical nature of dividends attractive? 

Thanks for reading.

Photo Credit: iosphere/FreeDigitalPhotos.net

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109 Comments

  1. A great reminder during volatility. I agree the predictability is a nice feature but also reminds you the business is still operating and making money (hopefully) whether the market is volatile or not.

  2. I hope you are correct on Chevron and all the other oil companies (cop/xom)!! The only thing that keeps me from selling is the dividend – if they are ever cut, I am a seller!

  3. RTR,

    Yep. These are real-life businesses selling real products and/or services, making real money and paying real dividends in the process. 🙂

    Thanks for dropping by!

    Cheers.

  4. JM,

    I remember you mentioning that you loaded up on a lot of energy plays recently. So if you liked the fundamentals two weeks ago, you should still like them now. Nothing much has changed (as far as I’m aware) over the last two weeks or so. 🙂

    We’ll see how it goes!

    Take care.

  5. Yup, bang on target! Thats why I dont really care about what the value of my overall portfolio is and what it does on a weekly/monthly/quarterly or even annual basis. All I care and all I can control is the dividend income stream. By ignoring what the macro events are, and whether the stock price will go down by a percentage point here or there, I can simply focus on simply buying quality assets at attractive-enough valuations.

    Nice post as usual, Jason. Keep em coming!
    R2R

  6. Hi Jason,

    Great article, thanks! The recent market volatility provides a great opportunity to revisit the fact that dividends have historically accounted for 30-40%+ of the market’s total return over just about every period of time – deep breaths, and stick to the strategy, especially in rocky times. Remember that prices are FAR more volatile than underlying businesses (in most cases).

    Brian

  7. Great article Jason. I love how you addressed the possibility of dividend cuts, but showed that with the rate of dividend increases, this should never be a problem in the long run with a diversified portfolio. It’s something many people fail to address but need to be prepared (mentally more than anything). Dividend income is the way to go! I’ve enjoyed following your journey.

  8. R2R,

    Thanks! Glad you enjoyed it. 🙂

    Yeah, I pay attention to macroeconomics like I pay attention to weather in Melbourne, Australia. That is to say not at all.

    Individual business results is something I pay some attention to, but blue-chip companies don’t require babysitting. All in all, it’s just not that difficult.

    We’ll see how it goes. Looking forward to seeing that dividend income roughly double every decade or so once I’m living off of it.

    Thanks for dropping by!

    Cheers.

  9. Brian,

    Yeah, I actually think that number is way higher than 30% to 40% if you’re looking at reinvested dividend income after inflation. Either way, it’s pretty significant.

    But you’re right. Prices might be volatile. But businesses’ results (and their valuations) aren’t. 🙂

    Take care!

  10. dollarafterdollar,

    Dividend cuts/eliminations are always a concern. But I think it’s largely overblown. If you’re diversified out across a few dozen or so high-quality companies, you’ll likely face few cuts over the long term. And any you do experience shouldn’t really make that much of a difference on your YOY income after factoring in the raises from the other stocks.

    Thanks for stopping by. Glad you enjoyed the article! 🙂

    Best regards.

  11. Agreed. I actually was thrilled to see my portfolio balance go down. Too bad I couldn’t capitalize on it due to low amounts of capital. Hopefully there will be more volatility ahead.

    Sincerely,
    ARB–Angry Retail Banker

  12. DM,

    Excellent article. I agree that one of the greatest qualities of dividend investing is the predictability. It’s something that I believe is often overlooked by investors. Also, I believe dividend investing truly re shapes one’s perspective when it comes to volatility in the market. Rather than panic during market meltdowns, we salivate at the opportunities presented and go bargain hunting.

    DC

  13. This article is exactly why I invest in dividend stocks. I don’t want to be worried whether my PAPER wealth will rise or fall tomorrow. I prefer to have cold hard cash delivered to me instead in the form of dividends.

    And dividends are as predictable as you can get, even moreso than the supposedly safest form of income of all: your day job. I could screw something up and get fired tomorrow. Doing opening/closing verification for my bank’s vault, I could screw up the count and get automatically terminated on the spot (that is what actually happens if you sign off on an amount that’s different than what’s in the vault). And that stuff aside, I don’t know where I’ll be working two years from now? In my same branch? For an investment firm? Private banking? Back office? Unemployed because I didn’t sell enough annuities? I dunno.

    But I DO know (or can reasonably expect, I should really say) that I will still be getting those KO dividends, and that they will be increasing faster than the rate of inflation. No one can take those dividends away from me. THAT’S the sort of job security I need, where you can’t get fired.

    Sincerely,
    ARB–Angry Retail Banker

  14. DC,

    Absolutely. High-flying stocks can be exciting, but I’d rather sleep well at night knowing that predictable income was coming my way. And that relates to your second point. If a company that isn’t profitable enough to pay a dividend craters by 25%, then what? I like this strategy because I know that I’m buying more passive cash flow when the shares are cheaper. I sleep like a baby. 🙂

    Cheers!

  15. So simple and yet people dont seem to get it. This is the very reason I’m investing and the very reason even with the market changing so quickly I’m still happy with what I have.

    Thanks Jason

  16. ARB,

    I hear you all the way. Can’t be fired as a shareholder, right? 🙂

    For me, it comes down to one paycheck versus, say, 60 paychecks. Which would you rather have? Which scenario is safer? Which is more predictable?

    Glad you enjoyed the article. Let’s keep collecting and adding to those predictable dividends!

    Best regards.

  17. Tyler,

    People want to overcomplicate things. But I see no reason why investing needs to be complicated. Quite the contrary, I find that easier is far often better. It’s been said that successful investing should be like watching grass grow or paint dry. Sounds boring, but collecting growing cash flow is anything but. 🙂

    Thanks for stopping by!

    Cheers.

  18. Your comment about being 80 with $300k to spend made me giggle. I’m a newbie at this but I have to say when my portfolio took a nosedive on Monday and Tuesday I worried a little but then I had the same perspective as you because two companies paid me dividends within that week. I just told myself regardless of what happens I can still expect to get paid. Of course I dutifully reinvested them at the market low prices!
    Have a great week.

  19. Dividend Mantra,

    I welcome a dip in the markets anytime, especially when I have capital to deploy.

    I am quite sure the dividend from CNR, RY, TD, BNS etc. will be paid each quarter to me as these businesses will continue to operate. These dividends are more secure than a job. BNS has been paying dividends since the 1800s for example.

  20. Great post! Can you say a bit about your cell phone deal? $25/months seems like a good price, and I’m wondering what you’re getting for it and through what company …

  21. I will be doing that too. Good idea Mike. Thanks DM.

    I hope prices continue to decline, I just don’t feel comfortable buying when prices are “high”, even though I understand that it shouldn’t make that much of a difference. It’s seems much more prudent to have a margin of safety by buying Chevron at 70, rather than 97 (for example).

  22. Michele,

    You’ve got the right mindset over there. Reinvest when prices are lower and take comfort in those payments that continue to roll in through thick and thin. 🙂

    Thanks for dropping by!

    Best regards.

  23. IP,

    Definitely. There are so many businesses out there with decades and decades and decades of proven dividend payments to shareholders through thick and thin. To worry about what’s going on with the stock market is just silly if you’re really interested in the growing cash flow. Other than hoping for volatility when I’m ready to go shopping, I couldn’t care less what stock prices are doing. But if you’re really doing it right, you’ll see those assets increase in value over time. The market eventually rewards those great businesses with higher share prices, whether we like it or not. 🙂

    Keep it up!

    Cheers.

  24. Jan,

    Thanks so much! 🙂

    Yeah, I hear you there. I would never recommend buying a stock for more than what it’s worth. However, I’ve found in most any market that there are stocks trading for fair value or less. Not to say a cheap stock can’t become cheaper, but I don’t really concern myself with that. If it becomes cheaper after I buy and I still have room for it, I’m likely just to buy more.

    Happy shopping!

    Best regards.

  25. Thank you for the insightful article Jason. Dividend Investing / Dividend Growth Investing is such a wonderful strategy. As a loyal student and follower of this strategy, it’s nice just to collect dividends every month for LIFE. It keeps coming like clockwork and once the system is in place, it’s so passive. Trying to time the markets and sell off a bit here and there each year for capital gains is way too stressful for my taste.
    I don’t think you could ever go broke or destroy your wealth if you only spent your dividends. Thanks for always trying to help us and get us to understand. Much appreciated bud.
    Keep up the good fight and glad to be traveling on this journey with you my friend.
    Always a pleasure bud.

  26. Jason,

    Excellent article, really enjoying reading it, but there is always exception confirming the rules. Transocean (RIG), just requested shareholder to accept the proposal of of not distributing the next two rounds of dividends, due to oil market situation. That I could not predict.

    Hopefully the price of oil goes up again soon.

    Cheers,

    RA50

  27. Tyler,

    Thanks for all the support. Very much appreciated. 🙂

    I’m with you on never going broke. If you live solely off of the dividend income, it’s almost impossible to screw up.

    Let’s keep striving!

    Best wishes.

  28. RA50,

    Thanks. Glad you enjoyed the piece. I do my best. 🙂

    I disagree that you couldn’t have predicted RIG’s dividend cut, though. I mentioned to you not long ago that they have a frequent history of poor operational results and dividend cuts. Just taking a quick look at their financials would have foreshadowed something like that. O&G is a crazy place sometimes, so that’s why I try to stick with the tried and true. You still sometimes get bit, but far less often than if you go with low-quality companies.

    Thanks for dropping by. Sorry to hear about the income reduction. Hope they’re able to turn it around at some point for you.

    Cheers!

  29. jason,

    A timely post again. I was thinking this throughout this past week. It’s too bad I didn’t have anymore capital to invest at this point, as I sure would’ve been all over jnj, t, xom, wmt, and appl. I did pick up some cvx and am a happy camper.

    I won’t lie, it does bother me a bit that my portfolio took those downward swings; and was relieved when it went back up. I do know in the long term those dividends will increase; and if I was fortunate enough to get in this past Tuesday, I’d be an even happier camper.

    I was around when vz was paying 0.36 per quarter, and was continually buying. Likewise with Duke Energy. And I was witness to all their pay increases. That’s one of the reasons I stuck with them. I’m so glad I never sold. And now I’m witnessing the steady increases from o, and cvx. There was a slight hiccup with arcp, but my other holdings kept chugging along. As you said, if you are well diversified, then the dividend suspension from arcp will not hurt as bad if at all.

    Keep on cranking out the articles. It motivates us all. I especially like the Dividend Income update. A lot of my holdings pay out on Mar-Jun-Sept-Dec. I especially look forward to your December update, knowing you had a full year to add to your positions via fresh capital and re-invested dividends. I’m sure it will be well into the 4 figures.

    j

  30. Hi Jason,

    Great article, and I totally agree that the predictability is what helps you sleep well at night, regardless of the Fed’s next move or other noise in the market.

    -Mike

  31. I am still DCA into these( very small amounts) but I am with you about the dividends and predictability – I just hope they don’t turn into the financial sector of 2009! I am keeping my fingers crossed!!!

  32. Hey,
    The mere fact that almost all the companies in your portfolio have been paying and increasing dividends for the past 10, 20, 30 years is amazing.

    Last Monday when JNJ dipped to the $82.xx range I literally couldn’t click fast enough to try and pick up some shares.

    Knowing that these high quality dividend companies are trading at their 52 week lows is having a breath of fresh air feeling, even if the market will still have some more volatile periods over the next few months.

    Great article, keep’em coming!

  33. Hello Jason
    A really good article with so much truth Jason. I know the markets move up and down. But the dividends stay the same or go up unless something company specify or the sector happens. We can monitor our stocks and if we see something that going to effect the dividend. So for me this pull back hit my portfolio total ( went down over all), but my dividends went up because I took advantage for this pull back to add to my stocks. Like you said you can figure out the dividends due to you. The stock prices who knows where that will go on the short term. But long term good company’s tend to keep going higher. So the way I see it you must stay in the game to get the rewards. So take advantage of this market when you can. As far as market timing I don’t think it works very well, I would same most investors time in at the high and time out at the lows.
    Cheers

  34. Jason,
    Great post! In one of your recent post you talked about using data from a web site called longrundata.com. It has a dividend reinvestment calculator. They also, annualized the dividend growth rates. I have looked at this site and am trying to figure out how to best utilize this information? Am, I understanding this correctly, the higher the annualized return, then the better your total return on the stock? How can I best use this information to purchase a stock? Do you use the information from longrundata.com when you are looking at stocks to buy?
    For example, if you look at Visa for one year and invested $1000 from August, 2014 to August , 2015, the annualized return is 37.48%. Then I compared Visa to Union Pacific Corporation, the same $1000 invested for the same period of time showed an annualized return of -15.79%. Out of these 2 stocks, I like UNP much better than V, but it appears that I would make more money with V.
    Jason, would you mind helping me to understand these numbers, what they mean and the best way to understand them, when buying stocks?
    Keep up the good work! Investing for YOUR future, how can it get any better?
    Thanks,

  35. Couldn’t have said it much better than that! Its a big part of why I love going for dividends so much. Not to mention that consistent dividends bolster your income DIRECTLY into your savings account! I’ll see Ads for banks saying how you’ll get rich by “Banking the rest” or “With just $25 saved a month, you can rest easy!”, then thinking, but I have on average more than $100 a month in dividends going there right now!

  36. Great article and great perspective on the value of dividends at a time like this. We don’t rely solely on dividends to fund our entire early retirement, but they are roughly what we spend each year. So it’s comforting to know that they continue mostly unchanged even though our portfolio has lost $100k+ and it’s down again today even more.

  37. Hi Jason,

    First of all great article! This was my first 10% + drop during my period of investing in high quality dividend stocks. I panicked a bit, because I lost 60% of my profits thus far. This article confirmed the idea of not selling stocks in ‘bad times’. Now I survived this, I could continue to follow the dividend investing strategy.

    Many thanks for sharing!

    Dividendfreak

  38. Jason,

    I want to preface this by letting you know I am long CVX and XOM. Also, I didnt intend for this to be a long post, I apologize.

    I read this short article this weekend about how in the next 10 years, BMW plans to convert virtually every single one of its cars into an electric vehicle.

    http://www.nasdaq.com/article/bmw-all-models-electric-within-decade-20150629-00597

    Seems like this is a more fundamental shift occurring in the future of gas powered vehicles, BMW isn’t the only one saying this kind of thing. I guess the question on my mind is, how do you determine when it stops being a good idea to hold oil companies for the long term? I know the popular answer among dividend investors is “a dividend cut will come long before the company goes bankrupt, so I will have time to get out then”, or something of that nature. There are obviously periods in the market where a stock (or index) can stay flat for 10+ years, which is part of the cycle and something I think a long term investor needs to be okay with. But I would be lying if I said I was just as comfortable holding CVX during a 10-15 year flat period vs JNJ (or V, CL, DIS, etc, you get the picture) during the same time frame.

    I don’t plan on oil companies ever being more than 5%+ of my portfolio, so even in a catastrophic worst case scenario, its still not bad for someone who is diversified. I don’t think however this should exempt me from trying to determine whether or not its appropriate to take my money elsewhere. A lot of the analysis I have been reading on oil companies lately seems like it only focuses on past valuation, div yield, etc, to determine whether or not a company is a good buy. Saying that “CVX is a good buy here because its yield is 5.5% and historically its 3.8%” seems very lazy to me. Like Buffett says, when we buy a stock we are paying for future growth, not yesterdays growth.

    Anyway, just wanted to get your take on this. Keep up the good work, I appreciate it. I read 100% of the content you put out here on your site.

    Spencer

  39. j,

    Thanks for the kind words there. Glad this keeps you motivated and inspired. We have to keep marching forward. 🙂

    Successful investing is more mindset than anything else. That’s something I’ve really picked up on over the years. If you have the right fortitude and resolve, market swings become nothing more than noise. I see red as green and green as red. I guess I’m fortunate in that it clicked for me fairly quickly, but my resolve has definitely improved over the years to the point where I’m absolutely giddy when stocks fall.

    Keep it up over there. Chugging along month in and month out leads to incredible results.

    Best regards!

  40. Mike,

    Thanks!

    Yeah, it’s hard to really care/worry about things I can’t control when cash is flowing and flowing. 🙂

    I know you feel the same.

    Cheers!

  41. JM,

    Yeah, a lot of banks cut/eliminated their dividends during that period, but not all companies in Financials operate the same. And many smaller banks did quite well. As did the Canadian banks. But, again, that’s why we diversify. 🙂

    Thanks for dropping by!

    Best regards.

  42. RF,

    Yeah, last Monday’s little crash was just a real gift. If you were up in the morning or had the cash set aside for some limit orders, you were in good shape. I invested something like $4k last month, so that kind of tapped me out. It’s all in the name of marching forward. But the occasional leap forward is wonderful. 🙂

    Definitely hoping the breather lasts for a while. Would love to see things drop by 10% or so across the board and actually stay there for a year or two. We’ll see!

    Cheers.

  43. Michael,

    Yeah, it’s that juxtaposition that’s wonderful. Portfolio goes down, but dividend income goes way up because your capital is able to work that much harder. And it’s that growing dividend income that is really buying us the freedom we crave and work hard for. 🙂

    Keep it up!

    Best regards.

  44. Nut401,

    Correct. The annualized return and total return are the same, but that calculator is assuming reinvested dividends. And it’s assuming exact dates. So your results will naturally vary.

    As far as V versus UNP goes, you invest in where a company is going, not where it’s been. So you’d have to look at the valuation of a stock after a near 40% run and then consider whether the valuation is still attractive or not. A big drop doesn’t necessarily indicate a stock is attractively valued. And a big run doesn’t necessarily mean a stock is expensive. Price and value are not one and the same. But you can look at those two stocks and see the valuations (especially after that spread) are quite different. Of course, they’re very, very different companies.

    See here for more:

    https://www.dividendmantra.com/2014/09/price-and-value/

    Your question really comes down to being able to fundamentally value stocks. And that’s something that’s beyond the scope of a comment.

    Take care!

  45. DW,

    Definitely. I love cash flow. Especially when it’s organically growing. 🙂

    Rockefeller apparently found pleasure only in his dividends. I guess I maybe have a bit more going on in my life, but they’re surely amazing. Money deposited into your account without having to work for it? What a fantastic concept.

    Cheers!

  46. Justin,

    That’s the right perspective, my friend. The portfolio value will continue to swing. Sometimes up. Sometimes down. Mostly up over the long run, though. But the dividend income doesn’t really swing that much. Which is nice because my expenses don’t oscillate all that much, either. It’s not like my landlord will cut my rent by 10% because my portfolio dropped by 10%. That predictability is nice in terms of how real life works. 🙂

    Thanks for dropping by!

    Best regards.

  47. Dividendfreak,

    The first of many drops, I can assure you. But when you look at them as an opportunity, you’ll welcome them with open arms. 🙂

    Have fun over there!

    Take care.

  48. Spencer,

    I’m not sure there’s any answer I can give you that will be particularly helpful. What I’m investing in has nothing to do with your goals and your portfolio. It’s said you are what you eat. But me eating a cheeseburger doesn’t put weight on you.

    I can only say that I’m not particularly concerned about the oil supermajors over the next 10 or 20 years. And that’s because the infrastructure in place is so heavily tilted toward conventional energy. The world’s need for oil and gas isn’t going anyway tomorrow, next month, or next year. And with a dwindling supply and more expensive projects coming online, you’d have to imagine that prices should remain more or less rational over the foreseeable future. It’ll be cyclical. It always is. But these are still major enterprises providing ubiquitous products and services.

    Looking out over the very long term, I think that renewable/alternative energy sources will start to take over. And that’s a good thing. The last thing the world needs is some kind of global apocalyptic energy crisis – that would affect everything. How heavily these traditional energy companies will be invested in that revolution is anyone’s guess. And I don’t think it’s going to happen overnight. So one will have time to shift, if necessary.

    But O&G isn’t for everyone. I don’t remember anyone asking these questions when oil was $100/barrel. Now that there’s a lot of volatility, some investors are freaking out and questioning the very nature of our global energy consumption. So I think at that point you really have to question whether or not you should be invested here at all. Those swings aren’t for everyone.

    Hope that helps!

    Best regards.

  49. Spencer,the first electric car was developed in 1884. The reasons why electric cars haven’t taken off are all still there:
    primarily – driving range (limited to about 100 miles)
    Recharging time (average of 4-6 hours even with modern technology). Modern batteries also lose capacity, if you think of this like memory capacity, if the battery is not fully discharged and re-charged routinely it “forgets” the unused portion thus losing capacity and hence reducing range (this is the reason your phone battery deteriorates). For many applications it simply is not feasible to limit journeys to these ranges. The technology requires a lot of development.
    Top speed, I think they are improving this but this is a factor for many drivers.
    Lack of infrastructure
    The maintenance costs – these specialised batteries are expensive and have an average lifespan of 3-10 years depending on how well they are looked after. Think $50 annual for an oil change versus $2000 every 5 years to renew battery cells.
    manufacturers use petroleum based products in literally all aspects of our lives oil is used in applications such as:
    lubrication for literally anything mechanical that moves
    Ink for pens / printers
    photovoltaic cells (Solar)
    upholstery
    Tyres and rubbers
    most clothes
    plastics (think computers, phones)
    cosmetics (perfumes, lipsticks etc)
    Air travel / sea travel
    Power generation – even wind turbines need oil for those bearings
    just to name a few
    And this doesn’t take into account that the oil companies produce gas also as the wells will contain both oil and gas which then go through a separation process.
    Whether we like it or not we are a long way from reducing our reliance on oil, and every day the developing countries are increasing their usage of oil.
    Even BMWs electric car in 10 years will require tyres, plastics, wheel lubrication, gearbox lubrication, the manufacturing processes to form the metalwork, upholstery, break fluids etc.
    The oil companies are already heavily involved in the renewables industries and are likely to be the leaders there also. just visit companies like Shell, Chevron, BP, Exxon etc and you will see they are invested in these areas already.

  50. Hi Dm,

    Once again a great article. The predictability of the dividend income of high quality is one of the reason why I went for dividend growth investing.

    Keep those articles coming I love reading them.

    Cheers,
    Geblin

  51. This is exactly why I love dividends so much and that I have so high confidence in many of these dividend paying companies.

  52. You indicate a long time horizon of 40 years in your example and stated: “So I guess you look at that and you think about the practical nature of generating income without worry or input”

    I would argue that it’s not at all without worry. When the S&P 500 index was officially formed in 1957 to its 50th anniversary in 2007, only 86 of the original 500 companies still remained. So over a slightly longer time horizon of 50 years there were only 17% of the companies remaining. I’d argue you absolutely need to worry if you and your readers are savvy enough to understand when to get out of declining companies before they disappear.

    Meanwhile you’re method is not investing in the constant flow of newer companies entering the market over the long term which have growth potential. Just my two cents and wish you all the best.

  53. Charlie,

    Q: What does the S&P 500 have to do with me, my portfolio, and my dividend income?

    A: Nothing.

    Seriously, though, I’m not investing in the S&P 500, so its age and constituents matters not to me. Companies like Coca-Cola, Johnson & Johnson, Altria, United Technologies, and many others have been around for a long, long time. And they’ve remained profitable enough to pay growing dividends through many economic cycles. I don’t see that changing anytime soon. But you’re right in that a company can face long-term decline. I’m not advocating buying and holding blindly, but rather buying and monitoring over the long run. However, these blue-chips don’t require regular babysitting. If there’s a major problem, you’re likely going to know about it well in advance.

    Thanks for dropping by!

    Take care.

  54. Dividends are definitely predictable (unless they get cut) and therefore are a great way to gain secure passive income. Right now I’m more focused on increasing my income and passive index investments to grow my nest egg. Once I get closer to FI, I may dabble more in dividend stocks to boost my income without having to sell index funds with I need cash to cover my expenses.

  55. This is a very nice and timely article. Predictability and practicality are precisely the reasons I choose to be a DGI. It’s those reasons that help me endure the market turbulence that we’ve been having. If I had to rely on selling shares I would be losing my hair right now, I’m so glad I’m not in that position right now.

  56. Great article again Jason. As of this evening I’ve just added my 3rd company to my baby DGI portfolio. Got on J+J for 11 shares at 93.70. Think it should be a nice solid stock to get my snowball rolling! 🙂

  57. EDH,

    Nice move there. Glad to be a fellow shareholder. 🙂

    JNJ is among my oldest holdings and I don’t regret for a second buying it and holding it. Looking forward to collecting growing dividends for years to come.

    Cheers!

  58. Hi Jason

    A great article, and I made similar points in two recent posts.

    While the value of my holdings has gone down, I am still a buyer, and getting the benefit of buying future dividends as the people will still need to buy their electricity, prescription drugs and water, no matter what the companies share prices have done.

    I can also demonstrate how a dividend cut can be offset by other companies increase. This year Tesco, who are one of my major holdings will almost certainly pay no dividend, two years ago their dividend was about 8% of my dividend income. Despite having paid no additional money into my Self Invested Personal Pension (I pay into a different account now), my total dividend income was more in 2014 than in 2013, and will be more again this year . So a dividend cut to zero still hasn’t reduced my total income, what better example of a diversified portfolio of quality companies who pay out (generally) increasing dividends being able to overcome cuts in one of the companies dividend due to a decline in their fortunes could people wish for.

    Best Wishes
    FI UK

  59. Hello Charlie, when you say “only 17% of the companies remaining” so you mean only 17% of the companies remained as part of the S&P 500 or do you mean only 17% of the companies still existed at all?

  60. @DF UK: I think your data about electric cars is a bit outdated. The Tesla S has a driving range of 200~300 miles, and its top speed is 167mph, faster than any limit in the US. Recharging time is said to be 20 minutes to 1h with their supercharger, and I believe they option to simply replace the battery.

    This does not change the fact that you make a very good point, but I’m personally looking forward more electric cars, and I’m hoping our dependency on oil is coming to an end.

  61. Jason, how about the “cons” of dividend stocks? At the very least, you have to pay tax on capital gains for those, per opposition to stocks that “just” increase in value?

    A great article, but I’d love to also read a bit more about reasons not to go with dividend stocks, in order to make an educated choice

  62. FI UK,

    That’s great to hear about your dividend income recovering in short order like that. People fear dividend cuts (rightfully so), but a properly diversified portfolio chock-full of high-quality dividend growth stocks should be able to easily weather a dividend cut or two. Unless a huge swath of companies that you’re invested in all eliminate their dividends simultaneously and the rest of the companies you’re invested in fail to grow their dividends at the same time, your income should recover and end up back in growth mode rather quickly. And that’s before factoring in any likelihood that the dividend cutter starts to grow its dividend again after temporary trouble.

    I’ll probably end up with 80 or more companies in the portfolio before I’m all done. At that point, a dividend cut or two wouldn’t make much of a difference at all after factoring in the dividend raises by the other 78 or 79 companies.

    Thanks for stopping by and sharing that. Love to see dividend growth investing and diversification in action in real-time. 🙂

    Cheers!

  63. Stockbeard,

    If I thought there were enough real drawbacks to write an article about it, I would. But I’m just not sure I have enough material.

    Taxes are potentially a drawback, but it depends on how you’re investing. If you want to stuff everything in a combination of your 401(k), Roth, and IRA, you’d minimize your exposure. In addition, taxes aren’t a major drain until you’re actually generating some serious dividend income. And, sure, no taxes until you sell “stocks that just increase in value”, but that’s assuming they’re constantly going to increase – capital gains can just as easily turn into capital losses. If there’s any point I’ve been trying to make lately – and that which recent volatility has shown – it’s that that capital gains come and go. I’d rather collect my predictable and reliable income and pay taxes. Moreover, I’d rather have a tax problem than a revenue problem. And I’d rather rely on predictable dividends than unpredictable capital gains/losses.

    As far as making an educated choice goes, it’s a massive internet out there. Plenty of detractors of this (and any other) strategy. 🙂

    Cheers!

  64. IP,

    Hey, thanks so much. Appreciate that. I’ll see if I can put something together. 🙂

    I know Kraig is busy with planning his wedding and everything, so I’m not sure when he’ll be able to get around to that. Hopefully, he’ll be back soon.

    Cheers!

  65. Nice article! Definitely, dividends are much more predictable than the finicky market. $15K is quite a bit but with market down more than 10%, its only 7.5%. considering that your total portfolio is about $200K. It is telling that your portfolio is behaving much better than market and that shows resiliency of most of quality DGI stocks.Keep racing!

  66. R2R,

    Thanks so much!

    Yeah, I’m not exactly sure how much the portfolio declined by in percentage terms against the broader market over that stretch. The last thing I do is compare my portfolio to the broader market on a day-to-day basis. I don’t even really compare it over a long period of time. That said, I do notice that my portfolio tends to hold up somewhat better when extreme volatility takes place. The only thing that sometimes throws things off for me is my somewhat heavy exposure to the Energy sector. That’s obviously caused more oscillations than I’m used to, although it’s not particularly concerning. Seeing these companies start to cut their dividends across the board would be more concerning. Stock prices change daily, but I’m after that growing passive income. 🙂

    Thanks for dropping by!

    Cheers.

  67. Jason

    As you know I invest in both stocks and real estate. My peace of mind comes from knowing I own 3 rental properties outright with no mortgages that generat 45k a year for me in free cash flow/dividends and I raise rent 3-5% a year.
    If you are after dividends/free cash flow could you not already be there with 1 or 2 rental properties owned outright.

    Screen tenants good and enjoy amazing cash flow as rents go up every year.

  68. Daniel,

    Hey, that’s great. $45,000 in free cash flow from only three properties (that are owned outright) is a pretty rare spot to be in. That’s $15,000 per year per property after all expenses are factored in. So those properties are commanding some pretty strong rental income just from some quick math. You’ve obviously invested quite heavily there. And you being a carpenter certainly helps cut down on the costs in exchange for manual labor. I can think of about 1 million things I’d rather do than fix up properties and keep multiple properties running smoothly, but it sounds like you enjoy it. And that’s what matters most.

    But like I’ve mentioned to you a few times now (I feel like I’m listening to an echo here), owning a few rental properties is just something I couldn’t be less interested in. And comparing that income to dividend income is really apples and oranges. Wish those who enjoy it and proper from it well, but I’ll stick to what I’m doing. 🙂

    Take care!

  69. I understand it, and I can sympathize with the cautious or thankful emotions being expressed in this forum. But, man, this is a freakin’ godsend (what’s another word for that). This has been a long bull with all of us faithfully buying on the up while searching for the downs. Come on! This is where it’s made, people. It’s almost like throwing darts! I want this thing to drag out for another 20% drop and then more and then a little more. I don’t look at the value of my portfolio—I look at the yield. I’m lovin’ it. It’s all the motivation and inspiration a person needs. Time for Ramen! Time to be at the ready. I hope. I lost my crystal ball for tomorrow—but I am enjoying all of my todays. Get it while you can, right? Lots of divys dispersed in September or fresh capital to control. Treat today like it’s the last day for clearance items and be ready to get it again on extended clearance. I’m ecstatic.

  70. divy,

    I hear you, my friend. And I share your enthusiasm. Except for the ramen… I can’t eat that stuff anymore. The last time I tried to swallow it, my body physically rejected it. Ha! 🙂

    But, yeah, there are still plenty of deals out there. I’m hoping to deploy some capital here quite soon, although I won’t have the $5k+ at my disposal like last month. Should be another big step in the right direction, however.

    Keep it rolling. Every day is another opportunity!

    Cheers.

  71. Hey Jason,

    I discovered your site whilst enjoying my hard earned holiday on a beach in Sicily, contemplating the rat race I find myself in & reading your article about the job you hated that got you all into this. Thx a bunch for that !

    I’m 33 and started a portefolio a year ago, before that I must have read 10 books & audio courses on warren buffet, lync , graham etc..
    Until now it has payed of well, I have an average return of 15% on my portefolio 🙂

    Right now I’m busy writing a python webcrawler/bot application in which I will feed symbols so it can auto analyze stocks according to “value investing principles”.

    Something I was asking myself about your portefolio is the sheer number of companies you buy into, how do you track this, read their annual/quarterly reports. Or maybe you don’t.
    I limit my exposure to 8-12 stocks max.

    I analyzed your last post you made about 5 stocks, UNP & UTX could be “very” interesting in the near term if they drop just a tiny bit more. I wouldn’t necessarily buy the other ones but you agreed on that too in your own article ( volatility, not for everyone )

    Keep up the amazing work, it’s great to see someone share all of his insights & experiences !

  72. I fit your model perfectly except for the fact that I am planning to start living on dividend income at 50. I should be almost at 40 k, so I can use your extrapolation, 80 k at 60, 160 k at 70, etc. I must admit–sometimes doubts creep in. Will they really grow that fast? Will the oil majors cut their dividends, etc?

  73. @ SB
    I would welcome Electric cars also, and you are correct I did not realise Tesla had improved it to that point however, that still does not reduce the reliance on Oil in so many aspects of the Tesla manufacturing process. Thanks for the info

  74. Jason,

    Great post that captures a lot of the ideas that floated through my head the past few days. Just like you, I’ve seen my portfolio go on a wild rollercoaster ride the past weeks.

    Obviously, “losing” money isn’t fun, but the fact that my future dividend income remained unchanged provided such a huge mental boost that I didn’t care in the slightest. What’s more, I even added to my positions quite aggressively if I felt their yield and underlying earnings were attractive – and let’s be honest, almost everything is on sale right now, especially for a beginner like myself.

    Your blog remains an oasis of peace and tranquility among many other financial websites. Well, apart from the overly enthusiastic folks in the comments that love to get into stocks at cheaper prices, ha! Thank you for keeping things into perspective.

    Cheers,
    NMW

  75. @ no more waffles
    I don’t necessarily agree with what you said that everything is on sale right now. A lot of stocks or even most stocks are still severly overpriced at the moment when I apply valuation methods. We have seen the market grow in the past years in ways we’ve never seen. This creates the perception beginners are doing well obviously.
    Beginners should learn how to analyze balance sheets, financial health, earnings etc of a company before blindly buying into companies that give high dividends.
    just my 2 cents from a fellow Belgian investor 🙂

    I’m also from Belgium, 33y old. Maybe we should meetup sometime and share our thoughts

    cheers

  76. This would be a great topic to take a moment of thanks… Today September 1 2015 the stock market is down well over 300 points well off the highs of a few weeks past HOWEVER 🙂 I received my Ford dividend today like clock work 🙂 My Thank You goes out to Mr. Henry Ford, Mr Ford Thank You for the foresight and hard work in building a company that continues to reward the share holders of the company you started 112 years ago. The risks that you took back in 1903 to build a company such as Ford Motor Company will continue for generations yet to come. So Thank You Mr Ford !

  77. Benjamin,

    A beach in Sicily sounds like an excellent place to have an epiphany and change your life going forward. Can’t think of many better places for something like that. 🙂

    Sounds like you’re doing well over there. Best of luck with your application over there. Sounds like fun.

    As far as managing a large portfolio goes, I don’t find it difficult or time consuming. But I discussed that here:

    https://www.dividendmantra.com/2014/11/is-managing-a-large-dividend-growth-stock-portfolio-time-consuming/

    That said, some investors prefer concentration. No right way or wrong way to go about it. But since I’m most interested in secure, reliable, and growing dividend income that I can live off, having exposure to dozens of great companies ensures that a dividend cut or two won’t find me dusting off the ol’ resume.

    Good luck over there!

    Cheers.

  78. DD,

    Yeah, pretty fun to play with the numbers, isn’t it? 🙂

    That 7% assumption is actually pretty reasonable, if conservative, if you look out over the last decade or two. And even if it’s only, say, 6%, which would be a very conservative number in aggregate when looking at most of these stocks, you’re still looking at a ton of wealth and income. Tough to go wrong.

    Enjoy the freedom over there!

    Cheers.

  79. NMW,

    Appreciate the kind words. I try to provide clarity in a world full of noise, rumors, chaos, and hoopla. Although, even this blog could be considered “noise”. But there’s nothing but real-world results here. 🙂

    You have the right perspective over there. And it serves one well to develop that perspective early on. After all, it’s more challenging to watch a $300,000 portfolio swing by 10% or 15% in a short period of time than it is to watch a $50,000 portfolio swing around. So if you develop that keen eye for value and long-term view on things early on, it’ll serve you well over time. And that knowledge compounds, which should make you an even better investor as time goes on.

    And I’m with you 100% on adding to cheaper stocks. Just bought more OHI today. The lower the price, the higher the yield (assuming no dividend cut). And so I’m buying more freedom with the same amount of money. How could anyone not want that??

    Keep it up over there!

    Best regards.

  80. Bob,

    I hear you there, my friend. Praise a lot of great, great people that have started up wonderful businesses over the years that will fund our independence. Doing my best to give back via this blog and all the content I create, but it’s a very small return of value on my part.

    Have fun reinvesting that dividend at even cheaper prices, which should result in even more accretive growth for you over the long haul. 🙂

    Cheers!

  81. Haha the example of when we grow to an old age is one that many pseudo-investors, that gamble their hard-earned cash everyday, forget to think about.
    I don’t even consider my portfolio variation, excepted if I need cash and have a green position that is rich enough in valuation to sell.
    Income, that’s it ;]
    Cheers!

  82. farcodev,

    I imagine it’s hard for a lot of people to think about an 80-year-old version of yourself. But I’m constantly thinking of this future me and what kind of position I want him to be in. I know for sure that the 40-year-old version of me will be thanking the me of today just like I’m currently thanking the me of five years ago for starting all of this. 🙂

    Income is it, my friend. I don’t buy things down at the net worth store. I buy things with cash flow, which is exactly what dividends are. And they’re far more predictable and practical, in my view, than capital gains/losses.

    Keep it up!

    Cheers.

  83. Thanks. I am new to your site and haven’t made it through much of the archives. Keep up the good work!

  84. Ha 😀 Thats a good point Jason. I have discussion with one guy who laughed at my strategy with 5% dividend income. He told that he earned 100% in a year from stock value trough. I pointed to indexes who rose at double figures since 2010 and he was just lucky to be in right time at right place. Few weeks later when this crash stated I asked how he was doing and got no reply. I can bet that he lost heck a lot of money and what most important is NERVES. I would probably go bald (hope that not the case for you Jason 😀 ) if I would invest in stock price and watch each day and then each hours their price, becoming happy when it rise and sad when it falls and depressed when it does what it did in these few weeks. Now i’m as you are happy that prices have dropped and I can buy more dividend paying stock for cheaper price 🙂 Nerve saving strategy for sure! 🙂 Glad we are on the same boat here 🙂

  85. It’s during times like these that I’m reminded how much of a joke “total returns” is. I like salary paychecks, I love dividend income each month and though “capital gains” is nice when it happens, it’s nonrecurring and doesn’t pay you constantly every quarter or every month while you sleep things off, away from a computer.

    I’m also getting tired of all the people around me crying about how “The Stock market” is falling and how they are gonna survive selling off assets at a loss to pay bills. My response: Get some income streams you idiots. Preferably more than 1% return on the dollar….maybe 3.5%, 4.3%, 5.5% etc

    Reality is harsh and trying to time the market and/or hope that stock prices will constantly go up when you demand it is stupid because it’s not going to happen. Massive Buyer & seller markets like the NYSE will always have price volatility, sometimes long periods of downtrends, the price you paid for a stock will always never be low enough you will go into unrealized reds sooner or later- big deal. You will also go into the green too, just enjoy the growing income you are getting.

    Also, this weekend I enjoyed two juicy burgers with bottomless fries, ice cream shake, a dozen wings and two orders of onion rings- all paid for by August’s dividends with plenty to reinvest with and I didn’t have to sell anything. Sure the income is small when you start out, but eventually when you hit $300 a month or something, they start to matter.

  86. furidolt,

    Glad we’re on the same page. 🙂

    Capital gains come. And capital gains go. But dividends tend to just keep on coming and keep on growing. If you’re looking for sustainable, growing passive cash flow that doesn’t require much, if any, input on your part, this strategy is simply wonderful. Expenses are tangible. So are dividends. Capital gains, however, can be quite fleeting.

    And the change in perspective is easily worth the price of admission. I absolutely wouldn’t want to be someone whose emotions hinged on the prices of stocks. But when you’re able to look at it from the perspective of seeing the opportunity at hand with lower prices (which is something that seeing a higher yield definitely helps with), you’re able to turn the whole thing upside down and use volatility as an opportunity.

    Keep it up over there!

    Cheers.

  87. Arthur,

    Couldn’t agree more. Thanks for sharing.

    The growing dividend income is basically all I care about. My expenses are tangible, don’t vary much, and paid in cash. So are my dividends. I quite like that. 🙂

    Sounds like you had a great weekend there. A delicious meal paid for by dividends. I hope to enjoy many, many such “free” meals for the rest of my life starting in about six or seven years. I think that might make the food taste just a little bit better than it ordinarily would.

    Keep it up!

    Best regards.

  88. Times like this little market blip ( which is all it really is for us dividend folks 🙂 ) is a good time to look at the companies you own and be happy with them. One company I own Trustco Bank … boring boring boring to some people BUT they have paid uninterrupted dividends since 1904 ! That’s 111 years ! Through the “Great Depression” World War 1 and World War 2, Recession after Recession they paid 🙂 I like boring my great great grand children will be collecting these dividends. Looking at most peoples portfolios here ( mine included ) many of the companies have paid dividends longer than we have been alive and will be paying dividends long after we are gone.
    LIFE IS GREAT BEING A DIVIDEND INVESTOR 🙂

  89. Bob,

    “LIFE IS GREAT BEING A DIVIDEND INVESTOR”

    I think that sums it up pretty well. 🙂

    There are a lot of smaller, community banks that actually have excellent dividend growth track records. Who would have thought that staying away from derivatives and focusing on old-fashioned banking that’s made money for over a century could actually work?

    Thanks for dropping by!

    Best regards.

  90. Mantra,

    Another legendary/legacy post you’ll have here! Absolutely great two reasons and reasons that everyone should consider when investing, and especially as a dividend income investor. Some of my friends are freaking out about the price swings. I just say well your dividend income isn’t changing and in fact – the store is dropping prices aka quality companies are going on sale, so it’s more urgent to buy more than to worry and sell… ahhh the different views of the investor.

    I like the way you showed how the income will grow over time with the rule of 72, where as if you worry about the valuation, you can’t control that and if you want to live off of “that” then you better pray to the market gods that fluctuation doesn’t happen..

    Bottomline, great post and thanks again Mantra, excited for your income post!

    -Lanny

  91. Lanny,

    Thanks so much. Glad you enjoyed this one. 🙂

    There are so, so, so many benefits to this strategy. But the change in perspective that occurs when you actually start to look forward to price drops because of the lower valuation and higher yield is perhaps the best one of all.

    I’m quite happy with the way September is starting out. Hoping it continues like this for the rest of the month. Let’s stay busy and have fun!

    Best regards.

  92. Jason thanks so much for the great article, and all the great information on this blog.

    It is very gracious of you to respond to everyone who writes you in these comments, and I hope I’m not being a pain but I wanted to ask you a question, since I don’t really have any trusted in real life investors that I talk with.

    I just got started as a dividend investor this year and am on track to meet my goal of investing 18k this year in dividend paying stocks. Now that I know I’m able to meet this goal, my question is how do I do a rough calculation on how much income I can expect if I keep up this pace of investing over the next 20 years or 30 years or 40 years?

    I’ve tried using some of the dividend reinvestment calculators online but find them confusing.

    My ultra long term goal is to create 36k a year in dividend income to live on, I’m having a hard time figuring out how long that would take if I keep going at a clip of investing at least 18k a year and hopefully keeping the yield at 3%

    Any resources you can point me to on calculating this stuff would be very helpful!

    Thanks!

  93. DD,

    Definitely! I’m happy to share and inspire. 🙂

    There are a number of calculators on the internet that will spit out the information you’re looking for, but I tend to find a pen and paper as good as (or better than) any calculator. And the output will only be as good as the input. Forecasting numbers out 20 or 30 years with extreme accuracy is, of course, almost impossible.

    But fellow blogger, Zero to Zeros, put together a nice calculator that’s super easy to use:

    http://zero-to-zeros.com/the-ztz-dividend-growth-calculator-of-awesome/

    Just kind of off the top of my head, I imagine you’d be looking at a couple decades or so to hit that kind of dividend income based on investing $18k per year. But there are a lot of factors at play there. Give it a spin, though!

    Hope that helps.

    Best regards.

  94. Thanks!

    That calculator is much more straight forward than others I’ve seen. Quick follow up question. What are good conservative numbers to use for the dividend growth rate and capital growth rate fields?

    Thanks again I really respect how transparent you are and how willing you are to engage with readers. Your blog is everyday reading for me, and I really value it as a resource and an inspiration.

  95. DD,

    Glad that calculator works for you. 🙂

    Like I mentioned in the article, 7% is pretty reasonable. You can go down to 6% if you want to be real conservative about it, but I generally figure about 7% in most of my long-term projections. It’s guesswork, but that’s largely grounded in history. Depends on how you invest as well, though. If you stock up mostly on high-yield, low-growth stocks, you’ll have to adjust accordingly.

    Good luck!

    Cheers.

  96. Like that piece Jason! Very much expresses what I think too. I turned from an index investor into a dividend growth investor for the very same reasons. I surely don’t regret it. Of course, the correction and recent drops might have some impacts on the short term speaking (actually leading to more purchases for those with capital). But other than that, volatility doesn’t affect me at all. I know that in the long run, risks are very low.

    Cheers,

    Mike

  97. Mike,

    Glad you enjoyed it. 🙂

    I’m with you, bud. Short-term volatility is nothing more than a long-term opportunity for us investors that are actively accumulating high-quality dividend growth stocks.

    Thanks for dropping by!

    Best wishes.

  98. Benjamin,

    That’s why I said “almost everything”. 😉 A couple of stocks remain quite high compared to the actual performance of the underlying business, but there aren’t many left on my watchlist. You’re absolutely right about needing to do due diligence before buying into a company though.

    If you’d like to meet up, you can get into contact with me through my blog. Would love to share our thoughts.

    Cheers,
    NMW

  99. Dividends certainly help smooth out the times like we are in now with market corrections. Thanks for sharing.

  100. smiller,

    Absolutely. It’s difficult for me to really care too much about volatility when my cash flow just continues to grow. 🙂

    Thanks for dropping by!

    Cheers.

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