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Dividend Portfolio for Passive Income 2015

{ 35 comments }

Last time, I checked to see how close we are to financial independence and we are about 2/3 of the way there. This means our passive income from all sources covers about 2/3 of our current living expense. I also found that the dividend from our dividend portfolio will be a bit higher than I thought. That’s what I’ll go over today.

Our dividend portfolio is a huge part of our passive income strategy. Currently, we reinvest the dividend, but it will be a ready source of income whenever we need it. My goal for 2015 is to generate at least $9,000 from our dividend portfolio. However, this is probably a bit too conservative. When I sat down and calculated it, I found that our dividend payout should be about $9,700 this year. That’s not including new money, reinvestment, or dividend growth. I’ll increase my dividend goal to $10,000 for 2015.

Dividend Growth

The main strategy for our dividend portfolio is to invest in solid companies with good track records of raising their dividend. This way, our dividend income will grow every year even if we can’t add new money. We have been doing pretty well so far since we started following this strategy. Here is our dividend record since 2012. Prior to 2012, most of the investment in our taxable account was in growth stocks.

  • 2012: $6,791
  • 2013: $8,036
  • 2014: $8,759
  • 2015: $9,700 projected

dividend growth portfolio passive income early retirement

 2014

The stock market had an awesome year in 2014 and a rising tide lift all boats. Most of our dividend stocks appreciated and we handily beat the benchmark, Vanguard Dividend Appreciation ETF (VIG.) I think we beat it by about 5%, but I will have to do tax to get the exact number. I traded a bit more than I planned to and I didn’t track performance closely.

For 2015, I hope to minimize trading so it will be easier to keep track of the performance. I’ll compare our performance with VIG again. Here is our dividend portfolio.

shares price 1/1/15 dividend %
Intel 789 36 2.50%
AT&T 100 33.2 5.60%
Eli Lilly 100 69.6 2.90%
Shell 400 63.34 5.80%
Leggett & Platt 500 44.03 2.80%
Umpqua bank 300 15.24 3.80%
Abbott Lab 100 44.28 2.20%
AbbVie 100 63.67 3%
Aflac 100 57.49 2.70%
Chevron 100 103.87 4.10%
JPMorgan Chase 100 55.86 2.70%
McDonald 100 91.59 3.70%
Coke 100 42.35 2.90%
Diebold 100 31.76 3.60%
Mondelez 200 36.55 1.60%
Altria Group 200 51.6 4%
Western Union 500 17.24 2.80%
Mattel 200 27.98 5.40%
General Mills 100 52.58 3%
Procter & Gamble 100 89.74 3%
Walmart 200 86.96 2.10%
Kinder Morgan I 111 40.6 4.30%
Sysco 300 40.21 2.90%
National Retail Property 200 42.43 4.00%
Universal Corp. 200 39.32 5.30%
Target 150 74.21 2.70%
Deere & Co. 100 85.88 2.80%
General Electric 400 23.7 3.90%
Ford 300 15.04 3.90%
VPL 200 56.37 2.70%

 

Dividend Portfolio $281,069.10 3.39%
VIG (benchmark) 79.3 2%

 

Intel

I sold about 1,000 shares in 2014 to diversify a bit. I used to work for Intel and these stocks are obtained via grants or the employee purchase plan. The price is quite good right now, but it’s a cyclical business and I’m sure it will go down at some point. I probably should sell a few more shares this year.

Shell and Chevron

The oil business didn’t do well in 2014, but I’m sure they will be fine in the long term. Gasoline will be $4 at some point and these companies will make a killing.

Mattel

Mattel was one of the worse stocks to hold in 2014. Toys are going on screen and I guess they couldn’t keep up. I’ll have to keep a close eye on them this year. If they can’t recover, then I’ll probably have to sell.

Mondelez

Mondelez isn’t quite a dividend stock at 1.6% payout. They haven’t done well since splitting off from Kraft 2 years ago. This is a growth stock that’s not really growing. I’ll probably sell this one off at some point too.

Everything else seems to be okay at the moment.

Sectors

Here is an easy way to see what sectors you’re invested in. I log into Personal Capital and go see my portfolio under the Investing tab. Once there, I select my dividend portfolio and click the “US Sectors.”

Dividend Growth Portfolio passive income

There is one mistake here. They omitted Shell. It should be under energy and bring that column up a substantial amount.

Ugh, we’re still low on utilities, basic materials, and communication. I’ll make sure to add to these sectors when we reinvest this year. I don’t DRIP because it’s complicated when we do tax. I just accumulate the money and make a purchase when I can.

Sign up with Personal Capital to easily check your sector weighting.

That’s it this time. It would be great if we can surpass $10,000 in dividend in 2015. We have some extra cash to invest so there is a good possibility it can happen. Those big round numbers are always exciting.

Dividend Investing Resources

  • Dividend Mantra – Jason is completely focused on dividend so he’s much more knowledgeable than I am.
  • dividata– See dividend growth and current dividend payout.
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{ 35 comments… add one }
  • Mr Zombie January 16, 2015, 2:16 am

    Hi Joe.

    I have a question for you and any others. I own no individual stocks at the moment. How long would you say you spend analysing and reviewing your purchases and holdings? More time than if you were index investing say..?

    10k in divi income seems amazing from where I’m standing. Sure you will smash the target 🙂

    Thanks,

    Mr Z

    • retirebyforty January 16, 2015, 10:44 am

      I spend a lot more time on the dividend portfolio than my retirement portfolio which are all in Vanguard funds. Investing is automatic with my Vanguard fund and it doesn’t take any time at all. I’m really slow when purchasing a stock so I probably spend 4-5 hours spread over several weeks. I check the basic numbers like the dividend, dividend growth record, PE ratio, and such. Dividend Mantra and other dividend blogs are great resources.

  • Tawcan January 16, 2015, 5:35 am

    10k in dividend is something we are aiming for. We are DRIPing in regular account and make sure to track the cost basis so it would be simple for tax return purpose. Have you thought about owning some dividend paying ADR stocks to diversify geographically?

    • retirebyforty January 16, 2015, 10:45 am

      I have Royal Dutch Shell. 🙂 A significant percentage of my retirement portfolio is in international stock and emerging market index fund. I don’t really feel the need to diversify further.

  • Jon January 16, 2015, 6:09 am

    Great work on increasing your dividend income. I am making it a point this year to focus in more on dividend investing. I have 2 main holdings right now, Altria and Duke. I am slowly adding to them, and am going to be adding another holding soon.

  • Maverick January 16, 2015, 8:34 am

    I’m not really interested in dividends that I have to pay taxes on each year. All else being equal, I’d rather have pure stock share appreciation in price over time. Only if I’m retired and living off of investments would I be interested in dividends to a limited degree. If I need money, I’ll sell shares.

  • Eric January 16, 2015, 12:23 pm

    The reinvested dividends alone will increase your yearly payout from $9,700 to about $9,850 if they reinvest at 3.39%–so you’re already halfway to your higher goal. The remaining $150 will be made by investing just $4,400 in new capital throughout the year–I’m sure you’ll be investing at least that much. And we’re not even factoring in any dividend growth!
    Do you think Intel will increase its payout when it declares its dividend next week? It’s been at $0.23 for over two years now, all the while having pretty decent EPS growth. I’m hoping for at least a $0.01 jump.

    Thanks for the article.
    Eric

    • retirebyforty January 17, 2015, 11:11 pm

      3.4% is pretty tough at this point. The high dividend stocks all had some kind of problem.
      I don’t know if Intel will increase their payout. The gain has been great, though. They got new management so who knows.

  • Jason January 16, 2015, 12:31 pm

    Joe,

    You’ll surely exceed $10,000 in dividend income this year if you’re already sitting at $9,700 in projected income. Even just dividend growth of 5% (which is low) will get you over the hump. Reinvesting dividends and fresh capital will probably put you well over $11,000.

    Solid holdings across the board. Wish I wouldn’t have sold ABT and ABBV after the split, but I believe I bought JNJ with the proceeds, so all is well.

    Thanks for the mention!

    Best of luck throughout 2015. You guys are in a great spot over there. Your money is already working hard for you now. 🙂

    Cheers!

    • retirebyforty January 17, 2015, 11:13 pm

      Thanks for the encouragement. You never know how the market will turn out.
      We have some extra cash to invest so I think we’ll be able to do it.

  • Max January 16, 2015, 1:20 pm

    Overall looks really good wow nearly $300k in dividend stocks, that’s pretty impressive.

    Only thing is that if you multiply it out it looks like you’d get $9,528.24, so if you get $10k that’d mean you’d have to get an extra $471.76. It would also be a 14.16% increase which would be pretty impressive.

    Good luck!

    • retirebyforty January 17, 2015, 11:15 pm

      Yeah, the 14% increase would be tough. We’ll have to reinvest the dividend and add more to have a chance.

  • hunblefi January 16, 2015, 8:12 pm

    Congratulations on the $10K per year passive income!! What is amazing is that since you are not using the dividends and reinvesting it back, compounding will become your dear friend now. As Dividend Mantra says, the snowball is starting to roll! Best of luck.

    One question. What reasons(s) do you attribute to the difference in gains between your portfolio (3.39%) to VIG(2%)? I would be interested in your thoughts. Thanks in advance!

    • retirebyforty January 17, 2015, 11:34 pm

      I think VIG is more conservative. They will probably do better when the market tank. I got a few positions that give higher dividend than normal like RDS.B.

  • Mark January 17, 2015, 5:54 am

    Why this obsession with dividend income? Could it be the recent high returns in the S&P500? Didn’t you pay more up front for the “safety” of dividend-paying Stocks?
    The Stock price/NAV goes down the same amount as the dividend, leaving you with the same amount of money and a taxable event. In addition, a high dividend strategy is highly un-diversified. Give me realized Capital Gains every time.

    • retirebyforty January 17, 2015, 11:37 pm

      I’m obsess with income because I’m semi retired. Dividend is taxed at 0% if your’rein the 15% bracket. That was nice in 2013. I think we’re over this year, though. Our retirement funds are invested in index and bond funds.

  • Mrs. Maroon January 17, 2015, 11:35 am

    Reading through your post and the subsequent comments reveals to me that I have so much more learning to do when it comes to the technicalities of investing. Right now, we focus all of our effort into finding more money in our spending habits to invest in total market index funds. Thanks for kick starting more research on my end!!

  • Retiredat50 January 18, 2015, 2:02 am

    Hi Joe,

    Very nice increase and professional follow-up of your portfolio. Our portfolio should give a very comfortable value of close to 20k this year. Now we with the significant drop that the Swiss market had last week due to the stop of the support of Swiss franc by our National Bank, we can probably continue buying some discounted stocks and continue increase our dividends.

    Thanks for the inspiring blog.

    Cheers,

    Retiredat50

  • Mark January 18, 2015, 1:05 pm

    Capital Gains are also taxed at 0% in the 15% bracket. Plus I get to deduct my losses from both my earned income ($3000) and other Capital Gains.
    A high dividend strategy is a poor Value strategy.

  • William January 18, 2015, 3:19 pm

    Hi thats some nice income you’ve got there.
    I recently started out aswell doing dumb by investing into ARCP for a low amount of money.
    Lost a tiny bit on it but it was a nice lesson to learn. As everywhere… there’s risks and only invest in quality companies is what I’ve learned by reading Jason his blog too. That’s a nice list you’ve got there. I’m only starting out this year and hope to beat at least 30 euro’s of passive income this year.

    Did you have a high amount of money to invest when you started out? I need about 1200$ a month to be FI. So that will take a while as Ive got a low taxi salary and all I can save is 1000-1200 $ a month. But even my dentist cost will be about 1000 euros for treatment… so another month I cant invest this year..

    Im only 26 so I still got time to get my money to work.

  • Matthew Waterman January 18, 2015, 3:45 pm

    The thing you mentioned about Mattel competing with electronics is not what’s actually happening. If you can move fast enough, you should buy them aggressively. Here’s why:
    http://seekingalpha.com/article/2788625-a-better-mattel-analyst-report

  • Mayan Queen January 18, 2015, 10:12 pm

    Rb40 I do not have experience investing in stocks, do you recommend that I start investing in stocks with some guidance like Scottrade. I am just afraid to make a mistake and I also have a full time job and do not have time to be on line reading and checking out stock performance on regular basis. What is a good amount that your think is right to start with. $50,000.00? I know I probably have to pay Scottrade a fee to invest my money but not having experience I am willing to do that.
    Thanks!

  • Josh January 19, 2015, 9:48 pm

    Do you invest in non dividend securities too? Also, you mentioned your expenses may increase in the future because of your desire to travel more. When that time comes, do you just plan to purchase more dividend stocks to keep your passive income inline with the expense increase.

  • Patrick March 3, 2015, 1:41 pm

    Hi,
    nice portfolio!
    I’m very interested in DRIPs. Do you know a good provider for non-us-customer (i live in Germany)? … or is possible for us at all? DRIPs are not available for the general public…
    Good luck for 2015 in advance!
    Best regards

  • brian May 21, 2015, 7:23 am

    Nice! Its gonna be awesome once you get above the 10,000 mark with the annual dividends.

    I guess I haven’t been following your blog long enough. Are you spending needs super modest that this dividend portfolio is covering 2/3rd’s of your needs? Or perhaps land lording is making up a bit of the difference….

    • retirebyforty May 21, 2015, 10:10 pm

      Our dividend income covers about 20% of our expenses. The rental income, blog, and other side income covers about 70%. Mrs. RB40 still works too so we can save a good portion of her income.

  • Jim September 9, 2015, 1:03 pm

    Sorry if this is a stupid question, but why do you buy stocks that generate ~2% dividend (or even as low as 1.6%)? Are there not enough companies in the 4-5% range that you like enough to invest in?

    Also: $280,000 seems like a lot of money to generate $10K in income when you compare it to landlording. I know landlording isn’t for everyone, and has it’s pros/cons, but you’re already doing it – why not buy another property and make more money than $10k?

    • retirebyforty September 9, 2015, 3:03 pm

      Some stocks only have 2% dividend because the price has gone up so much over the last few years. Generally, the price was lower when I purchased and dividend % was higher.
      Locally, the real estate market is getting really expensive. I’m not sure I can generate 10k with this much money. Anyway, when I sell I would have to pay capital gain tax and the amount will be reduced further.
      Short answer is that I didn’t invest $280k. The stocks appreciated.

  • andy November 10, 2015, 7:06 am

    Very good. Do you use scottrade?
    I see you post firstrade as the one you use. Just wondering if you use something else too. Or you if you have a few minutes why firstrade?

    • retirebyforty November 10, 2015, 12:28 pm

      I use Firstrade because I had an account with them for years now. They have very good customer service and I haven’t had any problem with them. Scottrade is really good too. I think both are about the same. You can also check Vanguard brokerage if your account is over $500k. I think you get free trades and some other services.

  • Robert November 16, 2015, 7:49 am

    Very very nice, i also try to build myself a dividend portfolio, right now, i am starting of with ETF fonds like these ones SPDR S+P US DIV.ARIST.ETF IE00B6YX5D40 ; ISHS-MSCI WORLD UC.ETFDIS IE00B0M62Q58 , what do you think about ETF´s?

    • retirebyforty November 16, 2015, 9:21 pm

      I like ETFs. I think ISHS-MSCI is a good one. Not sure about the others. I usually go with Vanguard.

  • Joe Coder December 9, 2015, 6:38 am

    What has been the TOTAL return for you dividend portfolio over say 3 years, or 5 years? I have learned the hard way (lo$$) that great dividends can often be painfully offset by price per share loss meaning the dividends are not the full story. Happened with I got into leveraged high dividend ETNs such as MORL, CEFL, BDCL which though they paid out 20-30% in dividends, the decline in share price completely made those dividends worthless, with an essentially 0% or worse TOTAL RETURN.

    • retirebyforty December 9, 2015, 10:12 pm

      I’m not sure what that total return is. I know it grew about 50% over the last 3 years, but that includes some additional investment. I generally buy steady blue chips and avoided high yield companies. Most of them have done very well over the past 5 years. The oil companies haven’t done so well, but I think they will recover eventually. Gas won’t be cheap forever.

  • From_Above February 27, 2016, 10:01 pm

    Do you write call options on your portfolio? I see a lots of stock in the hundreds.

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