Dividends. That’s what March was all about. There are few things that get me riled up like seeing a ton of dividend payments pour into my investment accounts, but this month might have overdone it a little bit. Like a small child counting the amount of presents under the Christmas tree every day until the 25th of December, I kept a close eye on my dividends. Let’s see why!
Even though every month slowly brings me closer to financial freedom, it’s nice to experience a big boost forward from time to time. This month did just that with twelve companies awarding me a small piece of their profits. Dividend growth investing is no get rich quick scheme, but it should come as no surprise that receiving twelve extra sources of income on top of my regular salary starts to add up after a while.
It’s clear from my last net worth increase that saving a large portion of your salary and putting those savings to work quickly grows your assets. Nevertheless, that’s just one side of the equation! Dividend growth investors try to take advantage of the power of compound interest in a myriad of ways, of which capital accumulation is just one.
Another one, and in my opinion a far more powerful effect of dividend stocks, is building a sustainable and growing stream of dividends. Ultimately, that passive income stream overtakes your expenses, rendering you financially independent. That’s why I’m so excited to write these type of posts and show you guys how the income growth materialises over time.
Twelve companies! That’s more than double the amount of dividend payments in February. It’s incredible to think that it has only been six months since I received my very first dividend ever from McDonald’s. Now eleven more companies are banging on my door with a small paycheck – let’s see who they are.
All dividends below are listed in Euros, and are after foreign withholding taxes and a 25% income tax levied by the Belgian federal government.
|10/03||JNJ||Johnson & Johnson||2.41|
|10/03||ROG||Roche Holding AG||17.81|
|21/03||RDSB||Royal Dutch Shell||6.31|
A lot of health care and energy companies have been putting in the works this month. My recent acquisitions of Swiss Novartis (VTX:NOVN) and Hoffman-La Roche (VTX:ROG) are already paying dividends – literally. The other major source of income in March was oil, with Royal Dutch Shell (LON:RDSB), Total (EPA:FP), and BP (LON:BP) all paying a hefty quarterly dividend.
What I really like about March’s dividend payments is how they all come from such different backgrounds. There’s health care and energy, as mentioned in the previous paragraph, but also insurance, technology, materials, and consumer goods. Because of the high dividend diversification, it’s unlikely that my March passive income stream ever dries up.
Of course these dividends will be reinvested in other high-quality businesses, but it’s always fun to see how much of my monthly expenses they could have covered. In February my dividends covered my Google Play Music subscription and internet subscription, but this month we can add utilities expenses to the list. This is why I love dividends: €102.75 of real purchasing power instead of simply trying keep up with the stock market.
Because March marks the sixth month of dividend income, it’s finally appropriate to add a trending line to my dividend income graphs. With this month’s huge income the tail of the trend line points firmly upwards, but I’m also really glad that the overall curve follows the same direction. Even with slower months like last January progress continues to be staggering.
Compared to one quarter ago I received almost three times as much dividends, 263% to be more precise. Even though my overall extra cash flow remains small, that’s staggering growth. March will probably always be one of the larger months of the year with many European companies finishing up their financial year and paying shareholders a piece of the profits, so it’s likely that June’s dividend income will be much lower again.
Being the heavy hitter it is, March did exactly what I expected it to do, namely boost my progress towards my goal of €500 worth of dividends for 2015 by a significant amount. That’s why I’m currently sitting at a little over 27% of the €500 target. With one quarter of the year behind us already that means I’m right on track to crack my objective.
Because January’s dividends pale in comparison to this month’s fresh and free-of-work income, I shouldn’t expect many payments in April, even though British distiller Diageo (LON:DGE) forwards the first part of its split dividend, for example. That doesn’t bother me one bit, however. Getting a dividend growth portfolio off the ground takes time after all. Besides, does it really matter when you receive your dividends as long as they continue to grow over time?
To me it really doesn’t. That’s why I invested in two new European holdings that pay a dividend once every year. The first one is the German reinsurance giant Munich RE (ETR:MUV2), which currently enjoys strong tailwinds from the European Central Bank’s Quantitative Easing policy. My second addition also takes advantage of low interest rates, but in a completely different way. REIT Home Invest Belgium (EBR:HOMI) leverages low-interest debt to expand its housing portfolio and thus increase shareholder value for the long-run.
With a high starting yield and a solid compound dividend growth rate, I’m sure that these companies will become cornerstones of my portfolio. Combined they already add over €75 to my forward dividend income, which is another major jump forward. Up, up and away!
Thank you for reading and for your continued support. Without you readers this journey wouldn’t be nearly as fun as it is now.