A couple of days ago I wrote that the value of my dividend growth portfolio isn’t all that important on the road to financial independence because I’m focussed on building passive income rather than capital. So why don’t we take a look at that income? More specifically, let’s see what March and April brought in terms of dividends?
As most of you know, I think these dividend reports are a great way for you guys to see what it takes to build a portfolio that generates enough passive income to live on. You can follow along how quickly (or slowly, of course!) I manage to make money that’s completely free-of-work. And as an additional bonus, I get to reflect on my strategy, my buys, and any actions I might take going forward.
Investing isn’t always easy, but the income portion of the dividend growth investing strategy takes the edge off market girations for me. Since dividends are a recurring phenomenon they act as a reinforcing stimulus that keeps me focused on what’s important: living below my means, saving as much as possible, and turning those savings into cash-generating assets.
And that’s just what I’ve been doing for the past two years. I’ve taken advantage of the power of compound interest. On the one hand I kept re-investing my dividends (although not automatically like some people do using a DRIP or dividend re-investment plan), while on the other most of the stocks I own, kept increasing their cash distributions to shareholders. Previously I’ve called this double dipping since both effects reinforce one another.
Of course, there have been difficulties. I mistakenly bought into pipeline operator Kinder Morgan (NYSE:KMI), miner BHP Billiton (LON:BLT) was forced to slash its dividend by 75%, and the Belgian federal government increased dividend taxation by 2%. Nevertheless, I’m really happy with my progress thusfar.
One of Swedish pop group Abba’s most famous songs “Money Money Money” tells the story of someone who works all night and day to pay the bills, and is sad about it. Thankfully, that’s not the case for me. Sure enough, I still work full-time to get my financial independence plan off the ground, but I can already rely on a pretty heft passive income stream.
No less than sixteen companies forwarded me a piece of their profits during March and April. That’s roughly the same number as last year, but the amount of cash coming in grew by leaps and bounds because of the aforementioned double dip approach. Let’s see what’s what!
All dividends below are listed in Euros, and are after foreign withholding taxes and a 27% income tax levied by the Belgian federal government.
|07/03||ROG||Roche Holding AG||17.13|
|08/03||JNJ||Johnson & Johnson||8.25|
|29/03||RDSB||Royal Dutch Shell||32.71|
|01/04||KO||The Coca Cola Company||3.16|
There you have it! Both March and April come in over the magical €100 mark, with March’s dividends totalling €109.50 and April’s €111.03. This is the first time I’ve had two consecutive months bringing in more than three figures, which is really exciting and bodes well for the future.
However, the previously mentioned dividend cut from BHP Billiton ate into March’s expected return. Thankfully British healthcare player GlaxoSmithKline (LON:GSK) decided to pay a special dividend for its oncology business swap with Swiss Novartis (VTX:NOVN). All in all, March and April are a strong foray into the European dividend season that’s currently going on.
These numbers are nice and all, but they hide the special ingredient of dividend investing: the growth component previously mentioned. It might not be obvious, but a small portion of the dividends received in March and April came to me automatically through increased cash distributions by the companies I own.
As a result, March’s numbers were 6.57% higher compared to last year – even with the dividend cut from BHP Billiton and the jump from Novartis to February. April performed even better with a triple digit growth number: 113.56%. Highly impressive!
As a result, my average monthly income for the entire year stood at €27 already at the end of April. “It’s just 27 Euros, not that much” I can hear you say, but when you consider that this level of income covers all my telecom needs for the entire year you’d probably think again.
Of course, I’m not stopping here. That’s why I bought into French healthcare giant Sanofi (EPA:SAN), which should pay me a handsome yield in May. As a result, I’m looking forward to May’s numbers, not in the least because its the biggest month of the year for most European dividend investors.
I’ve previously mentioned that I’m trying to create my own Win for Life lottery ticket by rigorously saving and investing. The past two months mark another big stepping stone towards my own Win for Life fund with both nice income and growth numbers compared to last year.
However, I may have been a bit too ambitious setting my income goal for 2016 at €1,500 for the entire year. With the previously mentioned dividend cuts it’ll be tough to crack that number this year without going into ridiculously high and unsustainable dividend yield territory. Of course, I’ll continue doing my best and we’ll see where I end up.
But first, let’s see what dividend month extra-ordinaire May brings us!
Thank you for reading and for your continued support.