The Slowly, But Surely Dividend Income Portfolio - December 2016 Update

| About: Realty Income (O)
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Summary

The Slowly, But Surely Dividend Income Portfolio is now more than a year and a half old.

More capital got invested during December 2016.

Dividend income from the portfolio exceeded income from any previous month.

Back in July 2015, I decided to embark upon a journey that had the intention to build up a stream of passive income over time. I have concerns that Social Security and my pensions from my employers will not provide enough income to really make my standard of living all that high when it comes time to retire in a couple of decades. I think that the pensions and Social Security will be there. It's just a question of how robust they might be when I decide to pull the plug on working full time (or when an employer or my health decide to pull the plug on my working on a full-time basis for me). Therefore, I decided that it would be a good time to start building up a portfolio sooner, rather than later.

My first purchase was a small $100 position in Wal-Mart (NYSE:WMT), which I've since sold. However, my overall investment approach is still focused upon purchasing solid companies that pay out stable or growing dividends over time. My intention is to see a growing base of invested capital that provides a growing source of dividends over a period of years. The dividends are reinvested into either companies that I already hold or new companies that pay dividends. Those new or growing holdings will then produce even more dividends and continue what I hope is a virtuous cycle toward financial independence. I realize that this process will take quite a bit of time and produce very small dividend payments in the short run. However, over time, the payments should increase to fairly substantial amounts--hence the Slowly, But Surely title for the portfolio.

In December, I put some more capital to work to build up my payout levels. I again used some of the cash that I'm periodically deploying in my rollover IRA account to open a new position in Realty Income Corp. (NYSE:O). As I noted in a previous article on Seeking Alpha regarding 4 Stocks I'm Looking At For 2017, I like the fact that Realty Income has paid out a growing dividend payment for two decades. This includes two major recessions, yet O kept humming along, paying out a growing dividend stream. Additionally, recent years have seen multiple, albeit small, increases in the dividend payment annually. This allows compounding to take place more quickly. Another reason I chose to pull the trigger on Realty Income was the fact that the price had dropped from a recent high of more than $70 per share to the mid $50s. This was a nice drop and increased the dividend yield because of little more than a concern over slightly rising interest rates. My entry price was just north of $54 a share. Finally, I like the monthly dividend payment, which is a pretty constant reminder that I'm getting paid real money to hold stocks in solid companies.

I also put some money to work in my taxable account to the tune of $215. This included some dividend reinvestment. I use Loyal3 as my brokerage, and the minimum investment is $10. When I get to this level or higher in dividend payments, I immediately put the accumulated money to work. Right now, I'm building up a holding in Unilever (NYSE:UL). I hit $10, and it went toward a fractional share of UL stock, which is well off of its highs from last year, as well. At the end of December, my holdings were as follows:

My overall return was about 4 percent higher, as I was down more than 5 percent when November ended. I also invested more than $700 toward high-quality companies that will pay me more dividends in the future. I built up nearly $27 in forward dividend income in just a month's time. Hopefully, most of these great companies will give me a raise within the next 12 months, as well.

These two portfolios that I manage myself brought in $17.66 in dividend income in December. I also earned some dividends from a 401k account that brought my total dividend income for the month to a new personal record of $66.76. This was well above the $9.67 I earned from dividends in December 2015 ($29.55 if I add in the 401k dividends), which is a nice increase--more than double, in fact. My annual total in dividend income, when counting the income from the 401k, came to a grand total of $241.61, and the forward dividend income (assuming the same payout from the 401k mutual funds) is now right at $360 for the year. My self-administered accounts should produce just below $280 as can be seen above.

I like to look at my dividend income in terms of how much freedom it can buy me. I assume that I'd need to bring in $20/hour to maintain a standard of living that's comparable to what I have now. If I lived only on dividends, I'd not be paying FICA. I'd not be putting money toward a pension each month. I'd also not be paying any taxes on the dividends under current taxation laws. If I just look at my self-administered accounts, I'd be able to take off nearly 14 hours over the course of the year, which is right around an hour and 10 minutes every single month. That's not terribly impressive, but it's growing. In percentage terms, I'm at about 0.67 percent of the amount of passive income that I'd need to retire fairly comfortably (0.87 if I count the 401k dividends). While this is obviously a small amount, it's more than the 0.61 percent that I could replace at the end of November 2016. It's growing, just at a fairly slow clip, again showing the reason for the Slowly, But Surely name.

I hope that these updates provide motivation for those who are just starting out in life to begin investing in high-quality companies that can improve cash flow on a monthly basis. If you find the updates beneficial, I'd encourage you to go to the top of this page and follow me. I appreciate any support that you might give.

Disclosure: I am/we are long MCD, KO, UL, KHC, SBUX, O, OHI, SO, GE.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I am not a licensed financial professional. This article is only for educational/entertainment purposes and should not be construed as a recommendation to buy or sell any securities. As losses up to and including all capital invested can occur, be sure to do due diligence and check with a financial professional before investing in securities.