Looking forward to the year ahead, I have summarized my expected dividend payments and put it together in a nice, motivational format. What do I mean by that? Being a numbers guy, I crunched the numbers. Let me summarize the highlights:
On average, I will receive 8 dividend payments per month. 3 of those are coming from monthly dividend-paying companies. 5 are from quarterly, semi-annual or annually paying corporations.
This also means that, on average, I receive a dividend payment every 4 days. In reality though, due to the payment structure of most companies, it’s rather every 2 weeks.
The total expected dividend growth for the year 2020 is anywhere between 15% (conservative assumption) to 40% (optimistic assumption). I put the pessimistic one in my budget first, better to be positively surprised later.
My annual yield on the currently invested amount will come up to 4,53% – after taxes. This might go down if I add more capital to the portfolio, and it will increase if my dividend estimates should move higher than expected. As I do have some plans to balance my portfolio and to do some adjustments, I am pretty confident that my dividend yield might reach over 5% by the end of 2020.
Compounding interests and monthly dividends
Now, in the 4th year of investing, I start to see and feel the power of compound interests. It’s just growing. Some shares rise, some fall. But the more I diversify, the more the portfolio can balance and bounce in the right direction.
And then, all paid-out dividends are being re-invested and create just more income.
This becomes especially obvious with companies that pay monthly dividends. These few cents, that come up on top every few months when I re-invest into an existing or in a new position, really start adding up.
By 2021, and with adding 3 more monthly dividend payers, I should receive a dividend payment every 3 days. Every single one of these dividends will be, on average, a double-digit one, enough to potentially cover all my regular daily and monthly expenses. Even without living too frugally.
Not enough yet to cover the rent, but enough for everything else.
A major step closer to FIRE.
The markets are not ready to stop
Of course, this is also due to the fact that we have a robust economy and the Wall Street party didn’t stop yet. Most experts out there and I, don’t think that there is a high risk of recession in the US at the moment.
But at the same time, I am hesitant to deploy more cash into US-Dollar-based companies. There are just too many uncertainties with the impeachment, the drama with Iran and the rising tensions with China and Russia to keep a very high level of confidence.
So instead, and with the exception of the 3 monthly dividend payers, I will go for European stocks. Mainly the UK and the Netherlands, as many of them pay quarterly dividends. Regarding the UK, I have the suspicion that BREXIT might turn out not as bad as expected, which would push the British Pound back on track. The UK also doesn’t have a withholding tax on dividends, which is a great bonus.
The Netherlands charge me a 15% withholding tax, but it’s still moderate and given the highly innovative nature and sharp business acumen of this small but scenic country, I see some opportunities to invest there.
The 3 monthly dividend payers that I am looking at are by the way the following ones:
- STAG Industrial (STAG)
- Gladstone Commercial Corporation (GOOD)
- Realty Income (O)
Disclosure: This article may feel, sound and be interpreted as financial advice, but it’s not. Investors are required to do their own due diligence, and accept risks that are associated with stocks and market investments.