They say you must become passionate to achieve your goals. Most of us believe that means we should find a career field that matches our dreams.
However, that’s a tough call. I was blessed to love being a US Marine for 24 years, but I found something I am even more passionate about than serving in the military.
Welcome to the world of dividend investing. I started in June 2019 and have continued the process every month since then.
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Why I became a dividend investor. Before June 2019, I was broke. I could afford to pay my mortgage and bills, but I had to use credit cards to have any type of fun or adventure.
My wife and I kept a tight budget, but the system just doesn’t work as intended. They tell you if both parents work, you should be fine. If one parent makes over $100,000, it’ll all work out.
I’m here to tell you that these are lies. The key to making a decent life for yourself is passive income. That’s what I learned in June 2019.
I became a dividend investor to give my family a chance at true happiness. Although they say you don’t need money to achieve happiness, having cash flow sure helps build a great life.
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I immediately became obsessed with dividend investing. All of my friends back then thought I had lost it, but then I read Grant Cardone’s book “Be Obsessed or Be Average.”
That book helped me realize that obsession is the only way to achieve greatness. I just had to make a change in friends.
Building dividend income. The first few months were amazing. I made $0.25 in dividend income in August 2019. My first dividend came from Papa John’s (PAPA).
No matter the numbers, I kept at it. In November 2022, I wrote an article titled “Earning $1,100 in Dividend Income.”
I would have hit $2,100 per month in dividends much sooner, but a major life event happened to me—I retired.
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Once I retired in September 2023, I slowed down on my dividend investments. Now, I am slowly building toward the ultimate goal of $5,000 per month.
Once I reach $5,000 monthly, I will focus on paying off my four houses. But, enough about the events leading up to this day. Let’s look at the numbers.
As you can see above, the magic in dividends is that you can start small. You must stay with the process until you achieve the results you desire. And you must become obsessed with the day-to-day operations of being an investor.
Doing the math. My compound annual growth rate (CAGR) is roughly 13.63%. This means how fast my dividend income is increasing. I can compare that number to standard annual inflation of 3% and know I am doing well.
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How much money does it take to generate $2,136 in monthly dividends? Let’s examine how the size of my portfolio has increased.
The CAGR from my portfolio is 9.1%. That means that my income is accelerating faster than my capital gains. This is because I focus on income, and the stock market is recovering from crashes in 2022 and 2023.
Portfolio composition. I use three types of dividend investing to compose my portfolio. They are all unique in their own way.
- Income Investing is my favorite way to generate income. I use high-yielding products to create the largest amount of cash flow.
- Dividend growth investing aims for a mix of growth and income. It achieves this goal by using the four principles of DGI. Great DGI companies are McDonald’s (MCD) and Starbucks (SBUX).
- Index funds are the final part of my portfolio. They don’t pay large amounts of income but ensure that my overall portfolio grows ahead of inflation.
Why is growth important to a dividend portfolio? I would love to invest all of the money I have in index funds into income products like closed-end funds. However, that wouldn’t be wise.
Although I focus on income, growth is significant in your investing success. Think of it as the equity you build in a rental property.
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Sure, we love it when our rents go up; however, we also want the home prices to increase. That gives us more options when we decide to flip the property later.
We don’t want our dividend portfolio to stagnate. There are two ways to increase its size: reinvesting dividends and organic growth. We get organic growth from index funds.
My personal take is that as long as my investment portfolio stays flat, all the cash flow my dividend portfolio spits out is free money. Again, this is just the way I view it.
For example, let’s say I invested $10,000 in AT&T (T) in 2019. In 2024, its total worth is still $10,000, but it has produced $4,000 in dividends. I’m okay with this scenario.
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However, adding index funds gives me some growth to pad my numbers. You must decide what the objectives are for your portfolio.
Layering your dividends. A better way to ensure growth and income is to layer your dividend style together.
Let’s say I have $10,000. I invest $6,000 in my favorite closed-end fund, PDI, at 10%, $2,000 in the dividend growth stock McDonald’s (MCD) at 3%, and $2,000 in the index fund VTI at 1.5%.
After five years, I may have earned $4,000 in dividends, which, combined with my portfolio’s growth, may total $17,000. This amount puts me in a better position to use dividends, capital gains, and equity to invest in other products or services.
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The best way to start your journey. That’s my journey in a nutshell. We got out of debt by getting roommates. Once out of debt, we forced as much money as possible into our dividend portfolio.
We are focused on increasing our dividend income to $5,000 per month over the next five years. We have found new streams of income to help accelerate the process; we are obsessed.
The best way to begin your journey is to envision your dream retirement. This process only works with an end in sight.
My dream was to retire to the white-sand beaches of Pensacola. I wanted my entire family with me, and we would all be financially free.
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My wife and I are living our dreams. My kids are leaving the house soon (17, 13), but I want to ensure our grandkids have every advantage I can give them.
For me, dividends represent freedom. I no longer worry about things that can happen. I have enough cash flow to solve most problems. We still budget and live below our means, but having $2,100 in free money helps me be generous and present.
Conclusion. What are you waiting for? The dividends aren’t going to grow themselves. The first few years may be slow, but I promise the path gets rosy along the way.
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I am proud of the journey. I have written about my dividend journey since June 2020, and I have published 1,493 articles on my financial freedom blog—as I said, I’m obsessed.
If you want to become a dividend investor, this is the time to start. The two best times to begin your investing journey are ten years ago and today.
The world can be our oyster if we believe. I’m glad I learned how to create passive income streams and pulled myself out of debt, fear, and suffering. You can do the same. 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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