The Slowly, But Surely Dividend Income Portfolio - May 2017 Update

Includes: GE, O, T
by: Christopher Price


The Slowly, But Surely Dividend Income Portfolio had its inception in July 2015.

Nearly two years in, I continue to add capital and dividend payments to this portfolio.

From a projected dividend income of $0 at the start, my portfolio should now throw off more than $400 annually.

This month's update for the Slowly, But Surely Dividend Income Portfolio is a bit later than it is in some months. I had a work trip that took up most of the first ten days of the month with quite a bit of work, and I had a pretty bad Internet connection at my hotel, hence the delay.

I always enjoy looking at my holdings at the end of the month to see how I'm faring in building up some dividend income. I gave the portfolio the Slowly, But Surely name because I usually do not have thousands of dollars to put toward my retirement each month. Therefore, this portfolio is adding up slowly, but surely.

I started my dividend income journey back in July 2015 after having read several articles on SA and some blogs on the topic. It seemed to me that it was a good idea get some dividend income that I could reinvest in addition to building up the amount of capital that I'd invested over time.

I have about two decades until "traditional" retirement time (I'm nearly 42, in the interest of disclosure). Therefore, I'm not getting a start at 22 and straight out of college. I don't have as much time to build up my portfolio, but I enjoy seeing the income that it will provide go up over time. I tend to invest in companies that have been around (and been successful) for decades.

Some people might wonder why I provide an update on a monthly basis. I do so to keep myself accountable. I also do so to hopefully show others how a slow accumulation of capital over time can lead to some nice levels of passive income. I firmly believe that passive income is the best kind of income that there is. Those who fail to get started on building it up will always have to work, at least until they can draw Social Security and/or a pension.

I do believe that Social Security will be around in the future, but exactly what it will look like is not certain. There is talk of cutting benefits back or making future retirees wait to take their payments. This makes building up another stream of income even more imperative.

I started out with basically nothing in my dividend income portfolio. I had a few grand in a 403b plan from a former employer and a pretty small 401k plan. I rolled my 403 into an IRA late last year, and it makes up a nice chunk of the portfolio that I show below. I basically started with no dividend income back in 2015. Now, it's built up into the hundreds. I'm hoping to get it into the thousands in just a few short years.

During the month of May, I made one purchase in this portfolio. I decided to double down on my investment in Realty Income Corp. (NYSE:O). I first purchased 10 shares when the price dropped from north of $70 a share to about $54. The price promptly went up to $63 or so after my purchase.

I was actually kind of disappointed when this happened, as it meant that the yield that I could get on another purchase dropped. I decided to wait and buy other companies. I like O, and I like the monthly dividend payments. I do not have to own more of it, though. Especially when it is overpriced.

My patience paid off, and Realty Income dropped over the past month to right around the price that it was when I first picked it up. I decided to buy 15 additional shares to bring my total holding to 25 shares.

This pays me about $5 each and every month, which does not seem like much. It's not, but the $63 that I should get over the next year can get deployed into more O or another company. This compounding process is, at least in my mind, the beautiful thing about the dividend growth strategy. After making this additional purchase, my portfolio looked like this at the end of May:

May 2017 Slowly, But Surely Dividend Income Portfolio holdings

May was not a great month in terms of the return that I got on my holdings. General Electric (NYSE:GE) and AT&T (NYSE:T) both saw some pretty heavy drops over my purchase price. My portfolio's return dropped nearly $200, or slightly less than 2 percent, over the end of the previous month.

However, I'm not in this for the return only. Of course, I'd have a big problem if companies that I own start to crater because of consistently bad numbers that cannot support the dividend income that I'm looking to build up. But I don't really think that AT&T is going to go belly-up anytime soon, so I'm not too terribly concerned with the drop of more than 2 percent that I saw in May.

What I did like to see over the course of the last month was the increase of my anticipated dividend income by nearly $40 a year. This came about mostly from the purchase of Realty Income noted above.

When it comes to my anticipated dividend income for the year that comes from this portfolio, I'm now up to $436.85. This is not a huge amount. It's slightly less than $40 a month. However, it's much higher than the $0 that I expected just two years ago, and I don't have to put in any additional work to get it.

In May, I earned $40.96 from the Slowly, But Surely portfolio. I also earned $3.14 from the 401k plan that I noted above.

I like to look at my dividend income in terms of the amount of freedom that it could buy me. I estimate that I'd need to bring in about $20 for every hour of freedom. I make more than this at work, but there would be many expenses that I would not have to worry about. Most of these are related to getting to work and taxes. $20 is a good estimate for what I'm looking at trying to replace.

My dividend income for May would have bought me right around 2 hours and 12 minutes of freedom based upon a 2,080-hour working year. This number is going in the right way. If I look at this on an annual basis, my estimated 12-month dividend income could buy me nearly 22 hours of freedom. This is nearly three full days. Obviously, I still have quite a bit of freedom left to buy.

My dividend income could now replace 1.05 percent of my working income based upon my annual estimates. That means that I still have to build up nearly 99 percent of this goal that will probably change over time because of inflation. If I can get to 100 percent, I can declare myself officially financially independent.

While 1.05 percent might not seem like much, it's up from the 0.96 percent that I could have replaced at the end of April. I must say that I always like to see this number going up on a monthly basis. My hope is that I can get it much closer to the 100 percent level in the next couple of decades.

I've now earned $149.41 in 2017 to this point. This includes income from the Slowly, But Surely portfolio and my 401k. June is shaping up to be a pretty good month in terms of dividend payments. I have several companies that should pay out this month, and my 401k plan tends to pay out in higher amounts the third month of each quarter.

How is your portfolio shaping up? Let me know in the comments.

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Disclosure: I am/we are long ALL STOCKS MENTIONED.

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.