February Dividends

One of my goals was to earn $200 in dividends this year. This goal was ill advised or poorly and incorrectly thought out. I did no sort of calculation or even deep thought when picking a number for the goal. I thought based on the dividends I received from my mutual funds in the four months I owned them that I could easily reach $100. At the time my mutual funds were paying out $4.69 in dividends each month which were reinvested in the fund. So with that mutual fund and the plans I had to buy dividend paying stocks I thought it would be a piece of cake to make $100 so I bumped it up to the next impressive number, $200.

This goal I now see is perhaps out of reach. It is possible I could put all my money in some stock, ETF, or REIT which would pay a very high yield and I would make the $200 but I am not willing to sacrifice my longer term goals of dividend growth to chase a number I might as well have picked out of a hat.

In January I made $7.57 in dividends. For February I made (imagine a drum roll) $7.57. Again $3.77 came from my mutual fund TFSA and RRSP and $3.80 came from my TFSA ETF. That sentence had a lot of acronyms. The ETF will pay $3.80 each month. It is the mutual fund which has me baffled. I am hoping that the dividend has only decreased with the time of year. I am not sure that makes sense but it is at least possible that the dividend fluctuates seasonally. If the dividends from my mutual fund increase back to where they were at the end of 2011 then it would help a lot with my goal.

Another thing that will help with my goal is the individual dividend stocks I have begun to buy now. I now have a stock that pays a quarterly dividend of eleven cents per share. I will receive the first of those payments on March 26. So in March, June, September and December I should have higher dividend earnings to report. That is of course only with that first stock I bought. As I get more money I put it towards more stocks, which will pay at different intervals. I prefer monthly payments but only because I like seeing the money in my account rather than just knowing that it is coming in three months.

After the first two months of the year I am still on pace for $90.84 in dividends. This does not take into account the dividend I am guaranteed to receive from my stock on the 26th, any of the other three payments from that stock or any dividends that I will receive from future purchases. So I think it is safe to say that I will surpass $100 and that $200 is not as unreasonable as I assumed last month, but still not as easily attainable as I first thought.

 


Comments

February Dividends — 8 Comments

    • I do not have an income right now, I decided to go without a job for the school year. Because of that I do not have a set amount of money I can save or invest each month. I do come across money every now and then and when I do I put as much as I can into my brokerage account.

      In the summer I will be working and I should be able to save about $200 a month at least.

  1. I just started buying dividend stocks in January of this year and my returns are so far very close to yours, $8 from JNJ and about $7 from PEP. I unfortunately chose a goal of $500 for my dividend goal for 2012 which, like you, I pulled out of thin air. Your post makes me feel better because I know that I am not the only one out there who is figuring this stuff out. Good luck! And you have got plenty of time on your side.

    • It is comforting to hear I am not the only one without the foresight to set a goal that makes sense. Just kidding. you got your work cut out for you to reach $500 but at least if you are trying to make that goal you are bound to succeed more than you would have without it. Plus you got two really good companies there. Good work and good luck.

  2. Personally, I would work on emergency savings first, maybe at ING Direct, and then work on dividend income. Drop me an email and I’ll send you a referral where you get $25 or so when you sign up.(I have them too, for US$50, I think, for INGs inventing option).

    • I personally do not think that I need an emergency fund. I am unemployed so I have no chance of job loss. My expenses are bare minimum and if I directed my savings from investments to savings account I would miss a lot of the compounding which is the great advantage of starting investing young. I might use the $25 referral you have some time, but I am definitely not looking for emergency savings. Thanks.

  3. I guess it just depends how many dividend paying stocks you own. My mutual funds paid about $85 last year, and I expect them to pay more this year (because I contribute monthly to the account). But it’s weird too. I last year I got a payment in December as usual but also in April for some reason. I’ve had the account for 3 years and that was the first time I got a dividend payment in April. Usually they pay out annually every December. My dividend paying stocks earn more than that, and pay out quarterly.

    I think $200/yr in dividends can be done on about $5,000-$7,000 invested, but it depends a lot on what percentage they pay out. I do not invest in stocks that pay less than 3% in dividends. It seems a waste with my savings account paying 2%.

    I’m curious what your criteria is for choosing dividend stocks?

    • I know that the reason I do not have more in dividends is partly because I do not have enough invested, but also because I started rethinking my investing strategy.I wouldn’t complain about an extra dividend payment. By getting paid in April too it gives you eight months to try and compound that money.

      I calculated it, with a 3% yield like you suggested I would need $6667 invested for the whole year. Right now I have an ETF paying 4.83% and a stock paying 1.3%.

      If a dividend stock only paid dividends then yes you could say that you money would be better in savings if it paid less than 2% But dividend stocks’ value grow just like other stocks. you can buy a dividend stock and then sell it for higher like any other stock.

      I rethought my investing strategy recently. I have a lot of time to invest my money, even if I retire early. I can let the markets appreciate like they always will over time and then buy dividend stocks when I need that income. I still really like dividends, it is a great feeling seeing more cash in my brokerage account when they are paid out. And a lot of the historical returns of the stock market have been from dividends. But I do not chase a high yield anymore.

      I bought an ETF of preferred shares because it paid a hearty 4.8% yield. since then the price of it has dropped 15 cents and does not move much day to day. It pays me a solid $3.80 per month, which I like, but I will lose money on it if I sell it to be a better stock or fund. My one stock pays a 1.3% dividend. I like it because it is the leader in its field and is priced under value right now. The stock has been as much as $72 and I bought it for $34. The dividend has increased every year, so with time my input of money will be yielding lot more. And the stock price will grow.

      I am trying to develop better criteria for my investments, I am going to start reading The Intelligent Investor by Ben Graham soon. But my criteria for specifically dividend stocks is a P/E ratio somewhere lower than 15 (but this is flexible), earnings per share around double the dividend (also flexible) and increases the dividend each year. I think that these criteria will help pick good stocks. Thanks for commenting.

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