When it comes to investing, everyone has a different approach. When I first started looking for places to grow my money, I immediately gravitated towards mutual funds. For me it was fire and forget…let a professional handle everything while I reap the rewards. A few years back, however, a colleague of mine opened my eyes to dividend growth investing and it dramatically changed the way I invested into the stock market. Since that talk, I conducted my own research, sold most of my mutual funds, and invested in companies promoting dividend growth…and I haven’t looked back since. Here are a few reasons why I now love my dividends.
More Money in My Pockets Now
The majority of the companies I own pay me dividends on a quarterly basis. A few even do so monthly. I have a calendar on my tablet that allows me to track when and how much I will get paid throughout the year. Most corporations declare dividend payments a month or two out making it fairly easy to forecast future income. I love the fact that I can take this money and place it back into my checking account to offset current expenditures. Need to pay the water pill? No problem, Coca Cola is paying soon. Need money for groceries? Chevron and Kimberly-Clark have me covered. It’s a good feeling to have this kind of streaming income to alleviate weekly and monthly financial obligations.
More Money for Me Later
Currently, I reinvest the majority of my dividends back into the companies that pay them. I do this in an effort to grow my overall portfolio in preparation for retirement. I love to see my quarterly dividend payments grow through the process of compounding interest. As my dividends repurchase smaller share amounts, I reap the rewards of an increasing paycheck throughout the year. What’s also great is the fact that certain companies I own even increase their dividend payments by five to ten percent on a yearly basis. Not only do I receive an annual raise, I am also protected against the eroding effects of rising inflation rates (which was 1.5% in December 2013). Currently, my portfolio yields an average of just over $500 a month in dividend payments. By reinvesting this money and purchasing more shares, the goal is to generate a healthy supplement to my retirement income when the time comes.
The majority of my dividends are from companies that are considered Dividend Aristocrats (have paid increasing annual dividends for at least 25 years). Going forward, I feel confident that these corporations will continue to increase their dividend payments on an annual basis. And I love this!
I am not a professional financial manager, just someone interested in taking charge of my own money. Please conduct your own research before investing. Long KO and CVX.