Paying My Bills With Dividends - 2017 Q2 Update

Summary

• My goal of full income replacement is decades away.
• Turning bills into dividend income goals provides intermediate goals that are easier to visualize.
• By reaching a couple of these goals already, I feel more motivated and more accomplished as an investor.

As the second quarter of 2017 has come to an end, I wanted to provide an update on my progress as I build my income stream to one day pay all of my bills from dividends. But for now, I will continue to participate in Dividend Reinvestment Programs (DRIPs). My last article, Paying My Bills With Dividends - 2017 Q1 Update, will be used to check my projections and make any adjustments going forward. I also thought it would be helpful to compare my portfolio to iShares Select Dividend ETF (NYSEARCA:DVY) and detail changes that will affect income during the current quarter.

My 2017 Q2 dividend income totaled $169.10 compared to the 2017 Q1 income of $163.49. This was a gain of $5.61, or 3.4%. This is despite the fact that Disney's (DIS) $10.37 of income from Q1 dropped to zero for Q2. It's hard to complain about DIS and its growing dividend, but quarterly payments would make things so much easier. Anyway, the quarterly increase is fueled in small part by reinvested dividends generating their own tiny dividends. Another contributing factor was dividend raises from Verizon (VZ), Pepsi (PEP), Intel (INTC), and Johnson & Johnson (JNJ). The main source of increased income came from new positions in Nike (NKE) and Realty Income (O), and additional capital invested in my Target (TGT) position.

In order to compare my income level to the income DVY would have generated, I simulated converting my entire portfolio to DVY on April 3rd, 2017. This ensured I would've received the dividend in June. For the most accurate comparison, I did factor in transaction fees that I would have incurred to follow through with this. The dividend payment I would have received from DVY totaled $171.06. This total did beat my income by about 2 dollars, but it's certainly close enough that I feel justified continuing as my own fund manager. Another factor for me is that it's still something I enjoy doing. Most of my hobbies cost me money, so falling a bit short of benchmarks is still a win.

My goal by the end of 2017 Q3 was to have a total dividend payment of $232.14 in order to be generating enough to make my monthly 401k loan payments. I won't actually use the dividends for that, but setting up goals based on my actual expenses helps my resolution. This goal does not quite seem reasonable anymore as it would require a quarterly increase of $63.04, or over 37%. While reaching this goal by 2017 Q4 may still be a bit lofty, that's what my new plan will be. I expect additional capital invested in June in both TGT and O to provide a nice boost as the combined investment was at a 4.7% yield. There is also likely to be additional income coming through stock purchases over the next month, although I'm not sure what they may be at this point.

I'm breaking my goal of total income replacement into monthly bills that I can increasingly cover with dividends. My income grew 3.4% to $169.10 from 2017 Q1, even while losing income from DIS, as it pays dividends in alternating quarters. My goal of generating $232.14 by the end of 2017 Q3 is no longer feasible. My new goal of reaching that milestone by the end of 2017 may still be too much of a reach. I will try to get there, but I don't want to be caught reaching for yield just to attain my self-imposed, arbitrary goal. As long as the goal continues to motivate me, it's doing its job. Thanks for reading.

Analyst’s Disclosure: I am/we are long DIS, TGT, VZ, O, INTC, PEP, NKE, JNJ. 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.