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Q1 2015 Dividend Income Update

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Q1 2015 is over and it’s time for a dividend income update. One of my goals for 2015 is to generate $10,000 in dividend income. Let’s see how we did so far this year and go over a few highlights and lowlights.

Dividend Income Q1

For the first quarter of 2015, our dividend income was $2,715. That’s great! We are on track to beat the $10,000 per year goal. In fact, we might even hit $11,000 in 2015. The great thing about the dividend portfolio is that our dividend income should increase every quarter. This is due to three factors.

  1. Reinvest dividend – I reinvest our dividend income in new stocks. I don’t DRIP because it complicates the tax when you sell. Although, now that the broker keeps track of everything, it might not be that difficult.
  2. Dividend growth – Most of the companies in our portfolio should increase their dividend payout every year.
  3. New money – We try to add new money to our dividend portfolio when we have extra saving.

Dividend income update Q1 2015

Dividend Growth

Here are the companies that increased their dividend in 2015 so far. Most of them are just one or two cents increase, but that’s still better than nothing. A few companies increased their dividend quite a bit, though. I haven’t been paying close attention to stocks lately so I probably should see why Abbvie, Western Union, and Ford increased their dividend so much.

Stock Dividend Increase 2015
Intel 4.3%
AT&T 2.2%
Ely Lilly 2%
Abbott Lab 9.1%
Abbvie 16.7%
Coke 6.5%
Western Union 23%
Walmart 2.1%
Kinder Morgan Inc 2.3%
Universal Corp. 2%
Ford 15.4%

Dividend Portfolio Performance

Our dividend portfolio’s performance is not that great so far. We gained about 0.8% year to date, including dividend. A few stocks really dragged down the whole portfolio.

  • Intel dropped around 15% since the beginning of the year. I followed the stock closely for over 15 years so the drop was somewhat expected. That’s why I sold off over half of my position last year. Perhaps I should have just sold off the whole thing…
  • Abbvie dropped about 10% so far in 2015. I’m not sure what the problem here is.
  • Mattel dropped about 18%. I should have sold MAT last year and taken the deduction. They have a new CEO so let’s keep an eye on them and see if they can turn things around.

The performance is not very good compare to the benchmark – VIG, Vanguard Dividend Appreciation ETF. VIG’s yield is about 2% so far this year. We still have 9 months left so we’ll see if our portfolio will be able to come back from behind.

2020 Passive Income Challenge

I thought this quarterly update would be a good place to keep track of my 2020 Passive Income Challenge as well. The goal is to have enough passive income to cover all our expenses by the end of 2020. Let’s see how we did in Q1 2015.

  • Dividend Portfolio: $2,360
  • Rental property: $1,026
  • Interest: $57
  • P2P Lending: $103
  • Joe’s retirement accounts: $2,854
  • RB40’s retirement accounts: $1,325

Total passive income*: $7,725

Q1 expenses: $11,425

% covered (FI ratio = passive income / expense): 67.61%

*This is pre-tax income so I will have to account for tax later. I’ll just shoot for pre-tax income to surpass expenses for now. We’ll deal with tax when we actually reached that point.

Anyway, it looks like we are doing pretty well. We didn’t have a lot of big expenses in Q1 so things look quite good. I projected 66% for 2015 so we’re ahead of the pace. We’re planning a big trip later this year so I’m sure it will come down a bit when that bill hits.

Dividend stocks are great for retirees

I love our dividend portfolio. It doesn’t require much work and the dividend increases every quarter. That’s a great fit for retirees. If you’re in the 15% tax bracket or below, you don’t even have to pay tax on your dividend income. Of course, dividend can drop during big recessions, but generally the companies raise the dividend back when the economy recovers.

Are you investing in dividend stocks? How did you do in Q1?

Disclaimer: This is not a recommendation. My stock picking track record isn’t great so you need to do your own research. This post will help us keep track of the gains and dividends to see if they meet my passive income goal. If you need help with financial planning, consider signing up with Personal Capital. Personal Capital will help you keep track of all your investments in one place and can hook you up with a personal financial adviser as well.

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Disclosure: If you sign up with Personal Capital, we may receive a referral fee depending on the size of your portfolio.

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{ 41 comments… add one }
  • Under The Money Tree April 8, 2015, 12:44 am

    There is some impressive dividend growth %’s in that list – certainly a compelling argument to adopt a dividend growth strategy!

    • Dividend Growth Investor April 8, 2015, 6:27 am

      I agree that these are some impressive numbers. However, I believe that selling that rental property off and reinvesting the proceeds in dividend growth stocks or REITs could result in less headaches and more passive income.

      • retirebyforty April 8, 2015, 10:41 am

        I still think rental properties have better return than stocks in the long run (like 30 years.) They are definitely more headaches, thought.

    • retirebyforty April 8, 2015, 10:32 am

      Actually, I like the 2-5% increase because it’s more sustainable. Ford’s dividend tend to fluctuate a lot with the economy. It’s probably better to go with companies that have long dividend growth record.

  • Ernie Zelinski April 8, 2015, 12:54 am

    Yes, I invest in dividend stocks as this 2012 article about me in ‘The Globe and Mail’ indicated.

    http://www.theglobeandmail.com/globe-investor/personal-finance/early-retiree-prefers-peace-of-mind-when-investing/article4431632/

    Shortly after this article appeared a financial advisor with ScotiaMcLeod in Toronto telephoned me to say he had read the article, purchased two of my books, and wanted to purchase 200 copies of “How to Retire Happy, Wild, and Free”. I happened to be going to Toronto the following week so I met with. He manages around $400 million of other people’s money and specializes in dividend stocks. After we became friends, he agreed to manage my portfolio for .5 percent (normal for high-worth clients is 1 percent or 1.5 percent).

    Besides placing a good portion of my money in Canadian dividend stocks, these are the US stocks that my financial advisor friend has placed some of my money in:

    * Abbott Laboratories
    * Berkshire Hathaway
    * Church & Dwight Co. Inc.
    * Coco Cola Company
    * General Mills Inc.
    * Johnson & Johnson
    * Kraft Foods
    * McDonalds
    * Nestle Sponsored
    * Proctor & Gamble
    * Unilever PLC Sponsored
    * Walmart Stores Inc.

    I really can’t tell you how well I am doing specifically with the dividend stocks (too lazy to figure out — that’s why I turned over my portfolio to my friend in the first place). All I know is that every so often when I calculate my total net worth, I am amazed how much it has gone up in the last 10 years, and particularly in the last 3 years. Of course, having a great income and being able to save a good portion of it helps.

    • Dividend Growth Investor April 8, 2015, 6:26 am

      Ernie,

      The fee you are paying seems very high, considering the fact that the companies you mentioned are widely known & held by dividend investors – they are large cap blue chip dividend stocks that everyone knows about. If your portfolio yields 3%, you are essentially forgiving 20% of your income to the financial adviser.

      • retirebyforty April 8, 2015, 10:38 am

        That’s actually lower than the standard 1-2%. I think if you want a totally hands off approach, then having your portfolio manage is a good way to go. Assuming the manager is good, of course.

      • Ernie Zelinski April 8, 2015, 5:56 pm

        Actually, the fee is quite low. I was asked to do a retirement seminar (about the non-financial aspects of retirement) in Calgary for Cardinal Capital Management, which has its head office in Winnipeg. The company specializes in managing around $1.8 billion of funds for high-net-worth clients in Winnipeg and Calgary. It charges 1.5 percent. The owner of the company gave a presentation before my seminar and I was surprised to find out that the company specializes in Canadian dividend stocks (as well as some US dividend stocks) and has almost the same portfolio mix that my financial advisor friend at ScotiaMcLeod has chosen for me. So, the fee is well worth it for me given that I don’t want to spend any time at managing investments.

        • Mike Drak April 9, 2015, 4:32 am

          Ernie, your fee is below market for an IA. He must really like your books!

  • Jon April 8, 2015, 5:19 am

    Now that I work from home, I don’t follow the details of the market that closely. I’m curious too why Ford upped their dividend so much.

    We don’t have a dividend portfolio, but I keep getting the itch to do one. One of these days I’ll actually jump in. Until then, I’ll just keep plugging away with our passive ETFs and mutual funds.

    • retirebyforty April 8, 2015, 10:33 am

      You should try Motif investing. I’ll write an article about it soon. That way you don’t have to invest a huge amount of money and you can pick stocks to your heart content. 🙂
      I don’t follow the details of the market that closely either.

  • Retired To Win April 8, 2015, 5:46 am

    Joe, I believe in dividend investing so strongly that, since 2009, all my investing has been in dividend-paying stocks. I am much more comfortable operating financially on the more predictable (but still not guaranteed) income that comes from dividends.

    Looking at your dividend income numbers, I am unable to compare how you are doing to how I am doing. That is because I can’t figure out what the dividend YIELD is on your portfolio. And without that number, I can’t figure out either how large an investment portfolio you would need for its dividends to cover your living expenses.

    The higher the dividend yield, the smaller the portfolio needs to be to cover expenses. So… have you figured out how large your portfolio needs to be to cover your expenses with dividends?

    • retirebyforty April 8, 2015, 10:36 am

      Yield is about 3.4% on our dividend portfolio. The yields are much smaller on our retirement account because those are all in Vanguard index funds. Our expenses are high at the moment so it’s tough to cover the whole thing with dividend. Once Mrs. RB40 retires and we paid off our home, then it should be much easier to do so. I haven’t calculated how much we need in our dividend portfolio yet. There are too many moving components at the moment.

  • Mike Drak April 8, 2015, 6:27 am

    I’m also a big believer in high quality dividend stocks and I’m close to being 1oo% invested in them alone. I’m focused on building my passive income stream year over year and I always smile when one of my investments announces another increase in their dividend. Investing this way and thinking long term I am able to avoid most of the noise associated with day to day market action which let’s me sleep a lot better at night.

    • retirebyforty April 8, 2015, 10:39 am

      I like dividend stocks too, but I don’t think I would sleep well with 100% invested. I like having our investment spread around a bit.

  • Justin @ Root of Good April 8, 2015, 7:32 am

    That looks awesome, and you are making significant progress toward your passive income coverage goal!

    I don’t really pay attention to the specifics of our dividend income, but notice the different funds fluctuate in how much they pay each year (but it seems to be generally upward over time!).

    • retirebyforty April 8, 2015, 10:43 am

      It’s tough to gauge with funds. They fluctuate depending on the underlying stocks.

  • kammi April 8, 2015, 7:52 am

    Haha we have some similar stocks there. One asked me to cash out, and the others are doing quite well. Motif is also awesome. I’ve started using them a few months ago and things have been going quite well! I’m hardcore into researching obscure companies, and have been doing quite well thus far this year!

    • retirebyforty April 8, 2015, 10:44 am

      That’s great! I don’t have any time to research so I’m sticking with big blue chips for now.

  • Pennypincher April 8, 2015, 7:56 am

    Joe, perfect timing on this post. I was going to request from you a more in depth post on this subject. Would like to learn more. Just received the book- The Ultimate Dividend Playbook, by Josh Peters of Morningstar. Any other recommended reading from you or readers would be most helpful.
    Also, how about a post on what personal finance books people are liking right now. Jane Bryant Quinn’s book-Making the most of your money now, is one everyone should own/read. Also reading Tony Robbin’s latest- Money-Master the Game. Interesting.
    Thanks, Joe!

    • retirebyforty April 8, 2015, 10:46 am

      Do you follow Jason from Dividend Mantra? He write pretty good in depth articles on dividend stocks. I’ll check out The Ultimate Dividend Playbook. Sorry, I don’t have book recommendations. Maybe Jason would know.

      • Pennypincher April 8, 2015, 3:42 pm

        I’ll look into Dividend Mantra w/Jason. I bought the Ultimate Dividend Playbook on Amazon. I always have good luck buying used from them. New, this book was 30.00. I bought it used for 8.00 and I don’t think it was used at all. Bingo!
        Joe, you have no time w/a preschooler, to even crack a magazine! Be patient, your time will come.

  • Tawcan April 8, 2015, 9:41 am

    That’s an excellent Q1 dividend income. We sold off some Intel stocks when it was at 52 week high, maybe should have sold some more to take advantage of the price…oh well. Glad to see that Intel finally raised the dividend payout.

    • retirebyforty April 8, 2015, 10:48 am

      It’s tough to sell off INTC, but I’m glad I did. The cost basis is low so that’s why I’m reluctant to sell.

  • Jason April 8, 2015, 11:08 am

    Joe,

    Not sure if my comment went through? I keep getting an error with CloudFlare saying your site is down?

    Anyway, I hit about $1,750 in dividend income. A shadow of the $8k+ you took in in passive income. Awesome work!

    Even better, your passive income is diversified really nicely. Keep it rolling!

    Best regards.

  • Jason April 8, 2015, 11:21 am

    Joe,

    Killer Q1 results. Very, very nice. And it’s great how you’ve got the passive income spread out so much.

    I received about $1,750 in dividends for the first quarter. Still solid, but a shadow of your $8k+ in passive income over the same period. Keep it rolling!!

    Best regards.

  • Kyle April 8, 2015, 12:07 pm

    Joe,

    Can you explain what you meant when you said you don’t DRIP because it complicates the tax when you sell? I understand what DRIP is, but do you mean its tough to keep track of your cost basis? The fund doesn’t do that for you? Or did you mean something else when you said it complicates the tax when you sell?

    Thanks!

    • retirebyforty April 8, 2015, 8:52 pm

      I don’t like DRIP because the statements will be a huge mess. I think you get a share or two every few quarters and it’s tough to figure out the cost basis. The broker keeps track of the cost basis now, but they didn’t previously (5 years ago?). Also, if you change broker, a lot of record seems to get lost and then it’s really tough to dig to figure out the tax when you sell.

  • humblefi April 8, 2015, 9:50 pm

    >> Q1 expenses: $11,425
    >> % covered (FI ratio = passive income / expense): 70.72%
    Yep…really wonderful progress with diversified income stream. Congrats! And thanks for sharing!

    I am curious about one issue though. You are basing your FI ratio on current expenses. Once your wife also retires OR when your son grows up, the expenses may increase. How are you planning for that? Do you have a buffer in your expenses? Please clarify if you are okay with it. Thanks!

    • retirebyforty April 9, 2015, 8:48 am

      We’re hoping to payoff our mortgage before she retires. That should offset our increased cost from health insurance. I think that’s the big one.
      When our son is older – I’m not sure. We are paying almost $500/month for preschool so once he starts public school we’ll have that money to play with. We’re already saving for college so I think we will be okay there.

  • BeSmartRich April 9, 2015, 3:49 am

    That passive income stream is truly amazing. Not only the amount but also the impressive diversification. Keep up the great work.

    BeSmartRich

  • MU April 9, 2015, 10:12 am

    Hi Joe,

    Thanks for sharing. Impressive numbers! Keep up the good work!

    I have similar passive income stream as yours: dividends, rental property, P2P, and retirement accounts.
    Among all these sources, I like dividends and rental property most.

    Rental property not only provides rental, but also create great future income with house Price appreciation. Especially if you use mortgage, there is leverage.

    My current focus is on dividends income. I like annual dividend growth rate and the compounding effect, although I don’t do DRIP either. Also, stock prices will go up with time as well.

    All the best — MU

  • Fervent Finance April 9, 2015, 3:42 pm

    I’ve become a big fan of DRIPs lately. Mostly because it will dollar cost average my position without me doing any work, and I plan on holding my positions for many years to come. Also the online brokers keep track of all the tax basis of your positions so doing your taxes really isn’t any harder.

    • retirebyforty April 10, 2015, 8:53 am

      Just don’t change broker. 🙂

  • Wendy April 10, 2015, 10:12 pm

    I’ve been learning a lot from your website. But I am not sure how you calculate your quarterly dividend increases. Can you explain how you did it? Ernie said he was too lazy to do it and hires a financial advisor to do it for him. Do you have a quick and easy way of doing it? Thanks!

    • retirebyforty April 11, 2015, 4:58 pm

      I check the dividend history at dividata.com. Then I just use the raise/last dividend payout. The website is very helpful for US stocks. Check it out.

  • ikomrad April 12, 2015, 9:48 am

    I’m curious as to where dividend income investing fits in you overall budget. I fund mandatory expenses , and then have what is left divided between my savings goals of
    Grow Emergency fund
    Save for House down payment
    Student loan payoff
    Save for retirement

    In that order. My Emergency fund and house down payment will be done in the next 12 months, then I’ll go whole-hog on paying off my student loans , and finally throw 15-30% of my income at retirement.

    Where would money for dividend income investing go in this picture?

  • Dave in Sunny FL April 12, 2015, 8:44 pm

    “If you’re in the 15% tax bracket or below, you don’t even have to pay tax on your dividend income.”

    I don’t think this is correct. Here’s some text on the subject, from investopedia.com: Another misconception about DRIPs is that they are not subject to tax because the investor is not receiving a cash dividend per se. In fact, while DRIPs are beneficial for their cost-effective approach to investing, they are still subject to tax. Because there was an actual cash dividend, although reinvested, it is considered to be income and thus taxable. And, as with any stock, capital gains from shares held in a DRIP are not calculated and taxed until the stock is finally sold, usually several years down the road. (For more, check out Capital Gains Tax 101.)

    I think you may have meant that you don’t pay capital gains tax when you sell these stocks, if you’re in the 15% bracket; but that’s a completely different issue than the tax on the dividend income you earn along the way.

    • retirebyforty April 12, 2015, 10:42 pm

      If you are in the 15% tax bracket or below, then the tax rate on dividend is 0%. I’m pretty sure about this. In 2013, we were in the 15% bracket and we didn’t have to pay tax on our dividend. Check with your tax guy.

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