The core of my overall investment thesis is dividend growth investing. This time-tested, alpha-producing approach allows me to clearly visualize the gains in my stock positions and blocks out the day-to-day noise that induces investor emotions. Currently at the age of 28, I hope to compound the returns from my DGI (dividend growth investing) positions and retire early. My long-term goal is to obtain annual dividend income of $100,000, at which point I may be able to begin considering a major change in my career and rely less on income from typical employment.
My dividend income is tracked across all of my portfolios (taxable accounts, IRA's, and 401k). A large portion of the target $100,000 will be produced within retirement accounts and thus not easily accessible during early retirement; however, I will aim to maintain a 33% proportion of dividend income in my taxable account. With this level of dividend income and adhering to the 4% rule on the overall taxable account size, I will be able to reasonably consider a change in career into a more part-time role or pursue other methods of income until I am able to access retirement funds. Meanwhile, my retirement accounts will continue to build and grow until I'm ready to begin taking distributions to fund my retirement.
Overall I have 31 positions, 29 dividend growth positions with 28 of these positions coming in the form of individual stocks and one in the form of a standard S&P 500 index fund, and 2 positions are non-dividend paying stocks that I hold with high conviction. I choose my positions based on the company industry, free cash flow metrics, gross margins, payout ratios, and dividend growth rates. By choosing companies that maintain strong metrics listed above, I can sleep more easily knowing that unforeseen changes in company growth rates and overall macro environment will be more easily absorbed.
I maintain a pretty evenly balanced portfolio with no positions currently holding a disproportionate weight. However, I do plan to let my winners run and expect to see a growing concentration towards my top positions as time goes on.
Below is a summary of all positions across my portfolios, including the non-dividend payers.
|Position||Percentage of All Investments||Projected Annual Dividend Income|
During the month of July, I put $2,025 of capital to work. I purchased shares of ALLY, STORE, FRG, and MPW. My projected annual dividend income now sits at $3,730. My plan for the near future is to invest $150 per week into my taxable account and IRA's as well as roughly $1,000 per month into my 401k.
For the next few months I will use weekly $150 to continue accumulating shares of ALLY, STORE, and MPW along with initiating a recurring investment in Corning (GLW). The $1,000 monthly 401k contributions will be largely concentrated in S&P 500 and large cap funds.
In the future I am eyeing several stocks to either add on to my current position or to initiate a new position. I will likely look to add to Comcast in the near future as I believe it is undervalued and have the opportunity to reduce my average cost. For the possible initiation of new positions, I am currently looking at a couple of companies including Dell Technologies (DELL) and Caterpillar (CAT). The attraction of the Dell position is due to the dividend recently being initiated for the first time and has room for strong growth in the years ahead. Caterpillar is enticing as a historical long-term dividend grower with new tailwinds as the US and Europe are accelerating investments in infrastructure for the foreseeable future.
Dividend growth investing is proven to be the best way to accumulate wealth and to achieve financial freedom. While I am far away from achieving my ultimate goal, I am happy to see the dividend income I've been able to build to this point and I am excited to see how quickly it grows over time. With recurring injections of new capital and investing in stocks that grow their dividends annually, I will be able to grow forward dividend income on almost a daily basis.
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Disclosure: I/we have a beneficial long position in the shares of VOO ADI VICI AMT STOR MSFT O UNP HD V DLR CVS UNH CMCSA LMT AMZN MPW WSO GLW GPK ALLY BOC BBY FNF GPN FRG AVGO TROW AFG SBUX CARR either through stock ownership, options, or other derivatives. 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.