Every day as an income investor, makes my life more enjoyable. It’s incredible to receive money from thin air.
I didn’t grow up with a lot of money and worked hard to provide for my family. I have worked for the US Government (as a Marine) for over 23 years.
I fully appreciate the hard work, dedication, and sacrifice it takes to earn your keep in this world. Conversely, receiving dividends makes me feel like I am skipping the pain and going straight to pleasure.
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Life as an income investor. I already wrote an article about my life as an income investor. Nothing beats getting paid while doing something else—we call this passive income.
In November 2022, I received $1,200 in dividend income. In December 2022, I am on track to receive $1,700.
How did I receive an extra $500 in dividends? Did I invest another $60,000 into my income-investing portfolio?
No, I didn’t do anything different to receive these dividends. They were special dividends given to shareholders of various stocks and closed-end funds.
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What are special dividends? Many companies (like real estate investment trusts and business development companies) must pay a certain amount of their profits as dividends.
To be safe, they keep their regular dividends at a set amount. At the end of the year, they may pay a special dividend if they have a cash surplus.
Other exchange-traded funds and closed-end funds have a similar method of returning value to shareholders.
Bond funds may receive capital gains from selling bonds above par. Or, they may receive special dividends from companies in which they invest.
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Bond closed-end funds. If you have read my articles about income investing, you’ll know I love PIMCO funds.
I love investing in their bond funds, specially PIMCO Dynamic Income Fund (PDI), PIMCO Dynamic Income Opportunities Fund (PDO), and PIMCO Corporate and Income Fund (PTY).
Across these three securities, I received an average of $0.58 per share. Since I have many shares of these beloved stocks, I had a huge payday.
Let’s dive deeper into how many shares I own and the regular and special dividends I received in December 2022.
A magical month of special dividends. December 2022 has been a magical month of dividends and special dividends.
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For me, dividends already represent guilt-free spending money; so what does that make special dividends?
It makes them even more guilt-free, which means I can spend them on something or someone (my wife and kids) special. Honestly, they put in the “special” in special dividends.
In December 2022, I received $565 in special dividends from these three securities. I also received special dividends from many more stocks this month.
Having grace and humility. It is humbling to know that we are on the proper path to wealth. Most people on this Earth would have to work 28 hours (@ $20/hour) to receive an extra $565.
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I must continue to have grace and give to those in need. I am not collecting dividends for the sake of having more money; I want more options.
Income investing has been a fantastic blessing in my life and has helped me reduce stress along the way. Receiving these special dividends is life-changing because they represent a preview of what’s to come.
The future of dividend investing. Imagine in five years; I receive $3,000 in special dividends. This amount is possible on our current trajectory.
At that point, we could plan an amazing vacation using those special dividends alone. How about in 20 years, when we receive $25,000 in special dividends?
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What can you do for $25,000? I could give my boys huge Christmas presents for their sons and daughters. This is how I imagine my future life.
Income investing and the rule of 72. Income investing is difficult for most people because most of these securities are cyclical—they travel up and down based on the economy.
Dividend growth investors buy great companies like McDonald’s (MCD) and Apple (APPL), while income investing focuses on securities that use leverage.
Fund managers use leverage, interest rates, treasury yields, loans, and credit swaps to push their revenue to the limit to achieve high yields today.
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As interest rates rise and fall, their “book value” can also take a hit. This causes a lot of dramatic price action on the stock market.
Many investors become emotional when prices fall and tend to sell at the bottom. They feel they lose total returns when they see red in their portfolio.
I choose to focus on the Rule of 72. The rule states that you can divide 72 by the yield to see how long it takes to double your money.
Focus on the rule of 72. Therefore, my only goal when I invest for income is to get my money back. If I buy a closed-end fund at 10%, it will take 7.2 years for the investment to return my money.
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Once I have my money back, I will still own the shares. Therefore, I have achieved an infinite return. So on good days, I receive a special dividend. On bad days, I may receive a dividend cut.
However, I just want my money back. If I invest $10,000, I want my $10,000 back in dividends. Anything beyond that is a gift from the lord.
Using the rule of 72 and focusing on achieving infinite returns makes my time in the market very peaceful. You don’t have to be the most intelligent person in the market; just have a plan that works for you.
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Conclusion. I wasn’t planning on receiving these massive special dividends this year. It’s been a down year in the market, so I had no expectations.
However, these dividends accelerated the rate at which my securities would become an infinite return. So what did I spend my dividends on this year?
I bought a Samsung Galaxy Tab S8 Ultra earlier this month, so I had nothing to buy. My wife said she was good, so I reinvested in more income-producing securities.
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Yes, this is boring; the large special dividends caught me off guard. Maybe next year, I will do something exotic with these dividends.
How do you spend your money if you are not an income investor? Do you have enough cash flow to invest in the markets? Do you buy growth tech stocks, dividend growth stocks, or index funds?
We all have choices to make, and building wealth should be a top priority. The only way to keep your family together is with options, and money is a huge part of the solution.
Now is the time to decide if you want a $565 car payment or $565 in special dividends. I made my decision, and I love the results. Good Luck!
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. All Right Reserved Military Family Investing
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