December was an exciting dividend month with over 3k in earned dividends. That’ll always be the case for investors who have a lot of money tied up in ETFs or index funds because most of those pay out on a quarterly or annual schedule. That means that we’ll have to wait until March to see the next “big” dividend month and then December to see the biggest one of the year.
The nice thing about dividends is that they offer a little piece of mind during times like these when the market is falling. I’m far from a point where I’m generating a ton of money in dividends but it’s always nice to have a hundred bucks extra to buy new shares with. In times like these when stocks are heading lower every day – the constant presence of dividends can serve as a good reminder of why we invest in stocks in the first place. Capital appreciation is the goal long term and gathering dividends and reinvesting them in securities – which may now be more attractively priced – certainly helps with that.
With all that said – let’s take a quick look at the what we saw in January.
My portfolio employee isn’t working as hard this month as he was in December – that’s for sure! My portfolio employee(Steve) earned me respectable $19/hr in December. Not bad Steve but he really slacked off in January earning a measly 0.66/hr – not quite enough to live on unfortunately.
That 0.66/hr or $110.30 total was split about evenly between my tax-advantaged bond fund that pays monthly and some lagging dividends from December that were paid out in January as well as some dividends from my Disney stock shares which I have since sold. The bond dividends went right back into my bond fund while the taxable dividends went into my cash pile which I’ve been slowly investing with small daily contributions into some commission free ETFs.
The nice part about Steve’s job is that his earnings get re-invested right back into his business so that means we should hopefully see an uptick in year over year growth when we compare this January to the next one. The $110.30 earned this month will be reinvested right back into my investments at an average yield of 2.5%. That means $2.75 in extra annual income or .22 per month. Not as big a bump as we saw in December for obvious reasons but every little bit hurts.
The bad part is that Steve obviously has a lot of room for growth as his hourly wage in January is still far from what he needs to provide for me to guarantee a comfortable retirement.
The thing to understand about Steve is that as an investor whose funds are concentrated in ETFs and index funds, his earnings will be pretty small in months that aren’t March, June, September and as we saw December. December will be his biggest earner(must be the new jobs he gets around the holidays) with the other months being a bit smaller. I do have some individual securities that pay outside of those months but for the most part, the months outside of those will be small in terms of dividends earned. Not a big deal but something to be aware of if you need to live off your dividends because there is an element of planning that goes into as one can’t simply live off month by month dividends but spread out the earnings from December to make sure they last for the next few months.
The hourly wage for this month might be lower but it should increase throughout the year as the bigger dividend months come in and hopefully Steve is well on his way to making a decent hourly wage in the years to come!
That’s it for January – see you all next month for another update. The data one the street calls for another lean month for Steve but things are looking better for March as the seasonal work picks up!
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