My dividend investment strategy; DRIPping towards early retirement. October 2019 dividend report

October was a very weak month for my dividend income portfolio. I thought this would be a great time to discuss my dividend investment strategy.

I am currently not using my dividend income to live on. Therefore I am still in the accumulation phase.

During this process I felt it was best to reinvest my dividend income.

I only invest in companies I believe in, therefore I have no intention of selling any time soon. I am a long term investor in these dividend paying stocks.

Every dividend paying stock I own is enrolled in a dividend reinvestment program (DRIP).

As mentioned earlier, October was a very weak month for me with regards to dividend income. Only one of my investments paid a dividend in the month of October.

Below is my Year to Date Dividend Income. As you can see I am a long way away from living off dividends in retirement. Unfortunately for me, I got a very late start accumulating dividend stocks.

As it stands now I would need to 10x my dividend income if I were to make a real attempt at living solely off dividend income.

That was never my plan and it continues to not be my plan. I wish it was, but I just waited too long. I will be using the 4% safe withdrawal rate as my guideline to retire early with these dividends as an enhancement.

Three quarters of the year is gone and my total dividend payments equal just over $3,000. My property taxes alone are 4x that amount.

As stated earlier, I got a late start. Had I jumped on this train 25 years ago, I could probably be using dividend payments right now to pay the good majority of my regular monthly expenses.

My strategy earlier in life was basically to dump everything into my 401k. With what was left, I fell victim to the dreaded lifestyle creep and never really thought about early retirement as a serious option.

It wasn’t until I reached my 40’s that I began to realize how irresponsible I had been with my finances.

My strategy now has changed from my earlier, less responsible years. While I still contribute to my 401k I do so only to receive the maximum company match. I do not contribute a penny more.

I can’t touch the money in my 401k without penalty for another 14 years and the amount that is in there now will continue to compound over that time. The difference in me adding contributions over those 14 years will be negligible.

So my goal has been to invest as much as I can into liquid assets that I can use to bridge the gap between the last day I work for an income and the day I can begin penalty free withdrawals from my 401k.

I was lucky enough to begin participating in my 401k early so the amount I have now is self sustaining. Compounding interest has taken over and it will continue to grow weather I invest in it or not. So I figure why not use the money to instead invest in dividend stocks and Index funds and grow a nice dividend portfolio to accent my retirement savings.

DRIPS

I reinvest every penny of dividend payments into DRIPS (Dividend Re-Investment Program). If I invest in a company, I am doing so because I have researched the company and I believe in the company. I do not invest simply because the dividend yield is high.

Therefore, I reinvest my earnings right back into the same company. After all if one share of the company is good, 2 must be better right?

My Goal

My goal is to ultimately have several different streams of income once I reach Financial Independence.

So for example I might receive $1000 a month from dividends and then another $1000 from my 4% withdrawal and yet another $1000 from my part time job. You get the idea.

Hopefully I can grow my portfolio enough over the next few years that the majority of my expenses can be paid without me needing to be committed to a job I no longer wish to go to every day.

Earl