Wow! We are now finished with 3/4 of the year and we are heading into a presidential election that is causing the stock market to be significantly volatile. Stimulus packages are on hold until the debate is over and our current President states one will be released, indefinitely. The stock market has pummeled downward and then upward. Talk about unpredictable. Dividend income, though, continues to be a very hot topic, as investors await announcements, fearing the potential dividend cut.
In September, we set another record for dividend earnings and it shows proof that dividend income is one of the best passive income streams. Time to dive into my September 2020 dividend income results.
Dividend income is the fruit from the labor of investing your money in the stock market. Further, dividend income is my primary vehicle on the road to financial freedom, which you can see through my Dividend Portfolio.
How do I research and screen for dividend stocks prior to making a purchase? I use our Dividend Diplomat Stock Screener and trade on Ally’s investment platform (one of our Financial Freedom products) – commission free.
I also automatically invest and max out, pre-tax, my 401k through work and my Health Savings Account. This allows me to save a TON of money on taxes (aka thousands), which allows me to invest even more. In addition, all dividends I receive are automatically being reinvested back into the company that paid the dividend. This takes the emotion out of timing the market.
Growing your dividend income takes time and consistency. Investing as often, and early, as you can allows compound interest (aka dividends) to work its magic. I have gone from making $2.70 in a single month in dividend income to well over $3,500+ in a single month. That dividend income record was set in 2019. The power of compounding and dividend reinvestment is a wonderful component to the portfolio. Each and every month, whether big or small, I continue to report the passive income that dividend investing provides me. Why?
*Not pictured is my wife’s dividend income above*
I want to show you that dividend investing makes it possible to achieve financial freedom and/or financial independence. We all start somewhere, but consistently investing, compounding (reinvesting) dividends and keeping it simple allows you to be in a significantly better position than most. Further, if I can grow this portfolio and income stream, you can too.
Dividend income – September 2020
Now, on to the numbers… In September, we (my wife and I) received a total of $3,331.98 of dividend income. A record dividend income month for us, to say the least! No doubt this is a record for us and I am hoping over $3k becomes the baseline for quarter-end months. The road to financial freedom from dividend investing is becoming clearer. The passive income stream just continues to grow.
Despite the pandemic from COVID-19, dividend income continues to grow, due primarily to additional investment and reinvestment. In the dividend stock purchases article released earlier in the month, my wife and I invested over $4,800+ in dividend stocks.
Further, though the dividend cuts hurt very bad, I know we did not take the worst of it. Dividend increases have also helped fuel the income growth. Dividend increases are discussed below and that’s one of the best feelings of being a dividend investor.
Here is the breakdown of dividend income for the month of September, between taxable and retirement (far right column, under “Retirement”) accounts:
Now, placing the retirement accounts to the side, there is one dividend payment that sticks out. Scotts Miracle-Gro (NYSE:SMG) paid a special dividend on top of a dividend increase during September. That led to a $241.75 dividend payment, so sweet, I love it!
Compliments to MarketWatch for the headline!
Outside of that large dividend payment, there is nothing really that sticks out from a dividend size standpoint. There are, however, many dividend aristocrats that pay. In fact, there are 14 dividend aristocrats above. Names such as McDonald’s (NYSE:MCD), Target (NYSE:TGT), Aflac (NYSE:AFL), Johnson & Johnson (NYSE:JNJ), PepsiCo (NASDAQ:PEP) and T. Rowe (NASDAQ:TROW); to name a few. This doesn’t include what’s in the retirement accounts.
I did not experience any dividend cuts during the month, thankfully. It’s been an interesting time to be a dividend investor. We have been thankful for companies that have maintained their dividend and appreciated every single dividend increase. I know that’s how I feel. Economy is picking back up and slowly, but surely, we’ll see a normalized year.
As for our retirement accounts, we received a total of $1,315.93 or 40%. The other 60% was from the individual taxable portfolio that can be used for everyday expenses. I need to keep bolstering the taxable account, as that passive income stream can be accessed today/right now. However, I continue and will always maximize the 401k and IRA, as that continues to pay-off in dividends, literally.
Dividend Income Year-over-Year Comparison
Dividend income, year over year, is higher by $306.09 (including my wife’s dividend income of $841.14 last year with mine). This is a 10% growth rate from prior year. This time next year, we will be pushing over $4,000. We can do this, no doubt!
Lockheed Martin (NYSE:LMT) and T. Rowe Price are bright spots in the dividend stock listing above. They have strong dividend increases in 2019, and with the combination of dividend reinvestment, you continually see the dividend income level rise.
I am curious what Kraft (NASDAQ:KHC) will be doing next. We have seen them cut their dividend down to pay off debt and right size their cash flow. However, results for the company have done better than expected during COVID-19 time periods. It will be interesting to see what is next in store for them and the dividend payment in 2021.
Aflac and Pfizer (NYSE:PFE) dividends are significantly higher, as well. I attribute this primarily to new investment with a small bang from dividend reinvestment. I was buying Aflac fairly often throughout the pandemic, hard not to continue to add to the dividend aristocrat, insurance payer.
The plan is to continue to invest where it makes sense and beef up current positions, increase the # of shares I own and set records again in 2021.
I received 4 dividend increases in September. What’s incredible is that they were all up to expectation, including one that exceeded and that one is Starbucks (NASDAQ:SBUX). See the dividend increase chart below:
Starbucks increased their dividend at just about 10% despite the fact that their dine-in facilities have been predominantly closed.
On top of that, the dividend aristocrat, monthly dividend payer Realty Income (NYSE:O) kept their momentum with another 0.22% increase, I’ll take it! Philip Morris (NYSE:PM) and Lockheed stayed very consistent with their dividend increases and definitely met expectations.
In total, dividend increases created a total of $48.71 in additional passive dividend income. I would need to invest $1,392 at a 3.50% dividend yield in order to add that income. Thank you for the increases, as I didn’t have to come up with the capital to create that form of income.
Dividend Income Conclusion & Summary
The name of the game is to apply what you learn through financial education. The next steps are to maximize every dollar for investment opportunities and live life on your own terms. My plan is to demonstrate that dividend income can be a revenue engine. A revenue engine that allows you to take back control of your life. A revenue engine to help you reach financial freedom. Dividend investing, once you learn the right way, becomes easier and starts to immensely make sense.
Excited for the future, no doubt. Further, all of the investing from last year and moves this year show that my aim to save 60% of my income, and making every dollar count, has provided the dividend growth.
We are trying to bring you financial education and help you reach your financial goals.
As always, thank you for stopping by, leave your comments and questions below. Good luck and happy investing everyone!
Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.