The goal of my portfolio is to use dividend growth investing to eventually replace my current income solely with dividend payments.
I plan on this taking a few decades, so I've set up smaller goals for myself in the way of monthly bills.
I've reached a few of these goals already, which motivates me to stick with this long-term plan.
With the end of another quarter, I wanted to provide an update on my long-term goal of full income replacement from dividend payments. I'd like to achieve this goal in the next 25 to 30 years, so I plan to use the compounding effect of DRIPs along with increasing monthly capital infusions to get me there. I knew for a plan spanning several decades, I'd be much more effective at executing it if I could identify bills along the way that my dividends could pay. I don't plan on using the dividends to actually pay the bills, they are just benchmarks to keep me motivated along the way.
My total dividend income for Q4 was $332.37 compared to the total for Q4 2018 of $258.24. That equates to an increase of $74.13, or around 28%. In my previous update, Paying My Bills With Dividends - Q4 2018 Update, I stated my newest quarterly goal was $321.12, which would pay our cell phone bill for 3 months. I cleared that goal through a combination of dividend raises and new stock purchases. New positions in 3M (MMM), AbbVie (ABBV), Cardinal (CAH), and Boeing (BA) were responsible for most of the gains I saw. I also saw across the portfolio dividend raises and increased payments from fractional share reinvestment.
Reaching my previous goal definitely provided some positive reinforcement, but it also means I get to move up my list of bills and knock out another, larger one. The next one will be our electric bill which averages $150 a month, so I'll be working towards $450 in dividend payments by Q4 2020. I've already taken steps toward that goal earlier this month. I decided to do some portfolio re-balancing and profit taking on some out sized positions. Through sales of some of my shares in Target (TGT), Microsoft (MSFT) and Chevron (CVX), and additions to my positions in ABBV, BA, Realty Income (O), Verizon (VZ), and Lockheed Martin (LMT), I was able to provide an immediate increase in my dividend stream of $32.71 per year without using any new capital.
I don't expect to do any more portfolio re-balancing this year, so I need to put fresh capital to work in order to reach my goal. I'd like to increase my holdings of Nike (NKE), Disney (DIS), and PepsiCo (PEP) because they currently make up partial positions. However, I have a paper gain of over 50% for all 3, and there may be opportunities that provide better value. Particularly, BA and MMM are stocks I've been keeping an eye on.
They've both had a tough 2019, but I'd expect them to bounce back. I care more about the dividend than the share price anyway, but it'd be great to lock in a historically good yield as long as dividends continue to increase. Seeing as how MMM has one of the longest streaks of increasing dividends at 61 years, I am confident that will continue this year, likely with an increase in the mid-to-high single digits. BA's streak is only at 8 years and their most recently declared dividend is the 5th in a row at the same rate. With all of the challenges and negativity surrounding BA and the 737 Max, it is completely understandable that they would delay an increase until there is some certainty regarding its regulatory troubles. When there finally is an increase, I'd expect it to at least keep pace with the 5-year DGR of 23%.
My goal during the next year may end up being a bit lofty based on what I'll actually be able to invest, but the smaller goals drive me to my ultimate goal of being able to pay all of my bills with dividends. Thank you for reading.
Disclosure: I am/we are long NKE, DIS, PEP, BA, MMM, LMT, ABBV, O, VZ, TGT, MSFT, CVX, CAH. 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.