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The Rising Tide Of Dividends

|Includes: Altria Group, Inc. (MO)

The Model Portfolio has now accumulated another $385 in cash from new dividends that have come in over the last few days. Let's see how many retirement days that will buy us. Here is where the Model Portfolio stands at the moment. You can see the ticker symbols for every position in this portfolio at the top of the Retirement Clock spreadsheet on row 1, and right below on row 2, you can see the number of shares. You can also see the total number of NEW shares I have purchased since I introduced the Retirement Clock concept last week - those are indicated on row 7. So far, we've added 9 shares of HCP with dividends that came in earlier in the week.

Look at the gauge to the left, and you can see that the Model Portfolio generates $11,600 in dividend income each year. On the gauge at the right, we see 11.8 years remaining until the portfolio reaches it's stated goal of generating $30,000 a year. Since I first started to use the Retirement Clock tool last week, I have purchased 143.76 days of extra retirement time because (1) I reinvested dividends and bought more shares of income producing stocks; and (2) I sold shares of an expensive stock (NYSE:MKC) and bought cheaper and higher yielding shares in a bargain stock (Apple) as detailed in a previous article.

I have decided to reinvest the $385 in new dividend income into shares of Altria (ticker MO). At some point, I will write an article that details more why I pick one stock verses another for this portfolio, but for now, I only want to illustrate how to think about compound income and the means for generating it. At yesterday's closing price of $65.86 per share, I can afford to buy 5 more shares of MO with my new $345 in dividend income. Doing so will take my annual portfolio income to $11,171.66, which is only an improvement of $11 per year. Not super exciting. What is more exciting, though, is what happens with an extra $11 of portfolio income compounding relentlessly over time: it adds 5 days of extra retirement time. You can see that my total contributions towards retirement now stands at 148 days since I first started using the Retirement Clock tool last week, and that I now only have 11.79 years left to go before this portfolio churns out $30,000 a year. A $77 investment today buys a full day of freedom in the 11.79 years.

Disclosure: I am/we are long MO.

Additional disclosure: This article, and the tools and information contained in it, do not constitute investment advice.