Disclaimer: I am not a finance professional and all materials below are for informational purposes only. I do not endorse any of these companies and you need to do your own research before investing in any stocks.
Dividend income is going to be a big part of my early retirement plan. The target is to generate about $500/month of dividend income from my after-tax portfolio. This income will help pay for cost of living after I quit my full time job.
Here are the stocks in my dividend portfolio. Intel yield % dropped quite a bit because the stock price has been on the rise over these last few months.
|Eli Lilly & Co.||Pharma.||4.91%|
If you haven’t heard that gas prices are going to go through the roof this summer, sorry to be the bearer of bad news. I’m thinking one way to mitigate the painful price hike is to buy some energy stocks, and by that, I mean oil company stocks. I started looking at Exxon, Chevron, and Shell. The problem with Exxon is that they are the biggest publicly traded company by market capitalization and I already own them through various mutual funds and ETFs.
It came down to Shell and Chevron and I confess that I didn’t do a huge amount of research. They have similar price to earning ratios (PE) and earning growth. Shell is paying out more dividends right now, but Chevron’s dividend payout has been growing quicker. I’ll put Exxon in here just for comparison.
|Dividend Growth 1 Year||0%||12.50%||6.82%|
|Dividend Growth 5 Year Average||5.94%||9.27%||7.99%|
We can see Shell has the highest dividend yield percentage at this time, but the dividend growth is lagging the other two. The payout ratio is also quite a bit bigger than CVX and XOM. From what I understand, we don’t want the payout ratio to be too large because there will be a larger chance of dividend payout reduction in the future. 33% seems ok to me though. That’s comparable to Intel’s payout ratio.
In the end I decided to go for the bigger payout NOW. If Chevron ever catches up to Shell, then maybe I can switch over. Shell is a Dutch company and they are a bit beaten down along with other Europe stocks at this time. Chevron had a pretty good 2011 and the stock price ran up quite a bit (about 15%.) I’ll keep an eye on CVX over the next few years and see how they do VS Shell.
RDS stands for Royal Dutch Shell. There are A shares and B shares. I don’t know all the details, but the important thing to know is that the A shares’ dividend is subject to Dutch’s 15% tax withholding. For the investors in North America, the B shares are the way to go. *Again, you need to do your own research. Don’t take my word for it because I could be wrong.*
I also plan to buy Vanguard Energy ETF (VDE) with any new contribution in my 401k for a few months. What do you think about this plan? Am I putting too much money into Energy?
photo credit – flickr ReneS
For 2018, Joe plans to diversify his passive income by investing in US heartland real estate through RealtyShares. He has 3 rental units in Portland and he believes the local market is getting overpriced.
Joe highly recommends Personal Capital for DIY investors. He logs on to Personal Capital almost daily to check his cash flow and net worth. They have many useful tools that will help every investor analyze their portfolio and plan for retirement.