June was a great dividend month for me as it was the first time I hit $1000 in a month that wasn’t December! That was a big milestone and I hope to continue to see that number grow each quarter going forward.
I’ve mentioned before that I was mainly a mutual fund/ETF investor and we all know how dividends go in that world. I do own a few individual stocks most of whom pay dividends but ETFs and mutual funds generally pay out quarterly(March, June, September, December) or annually(December) which means off months are really really lean.
July is one of those off months as it’s my worst month yet in terms of dividends since I started tracking them. I do not own any individual securities that pay in July meaning my only taxable dividends were my meager money market interest earnings. My bond fund which is the only one of my funds that pays monthly makes up almost all of the dividends this month.
Small dividend months aren’t a huge issue for me because I’m mainly concerned with overall yearly income and price appreciation. If I were retired now and living off my dividends then I could simply take the large quarterly payment received in June and split it across the following three months to cover living expenses.
In that regard, there really is no difference between monthly payments or quarterly payments in my mind as the overall total works out to the same number.
As I’ve mentioned before, my overall portfolio strategy is not designed around maximizing dividends but it is a nice little side benefit to owning any type of security. Dividends are often a good portion of overall return so it’s nice to see them increasing year over year.
I also believe that long term growth in dividends is a sign of a healthy portfolio and can help an investor weather difficult times. Market downturns can happen any time meaning a potential decrease in your portfolio value despite continued contributions. We saw that recently with the brief BREXIT dip as well as the dip earlier in the year but more so in 2008. These dips whether short or extended can be mentally taxing for investors as the fear of permanent loss however unlikely it may be can creep into their minds as they see their portfolio shrink daily.
For me at least dividends certainly help with that fear as I know that even if my portfolio is shrinking, dividends are being paid out and reinvested at lower prices which eventually lead to better long term returns. Knowing that my securities still produce income even if their price goes down certainly makes it easier to hold and even buy more when prices take a big dive as that’ll only help to increase income generation potential.
Of course, dividends can certainly be cut as well. We saw that most commonly in 2008 and 2009(295 dividend cuts in 208 and 527 dividend cuts in 2009) and more recently with oil companies like KMI and potash companies like POT as commodity prices dropped(394 dividend cuts in 2015).
That means there’s no guarantees but it also means that spreading out the risk in mutual funds and ETFs is also relevant to dividend investing for those more concerned about income. It also underlines the importance of due diligence when investing in individual stocks as dividend cuts can be just as taxing on the income investor as are market dips.
I know that as I look at my portfolio, I feel good on both ends of that spectrum and also feel OK when I see months like July where I barely see anything in terms of dividend payments. The month to month dividends may not look as pretty since quarterly payments rule my portfolio but I’m OK with that because this type of investing strategy adds a layer of safety to my investments that I’m more comfortable with if we ever go into a turbulent market.
With all that said – let’s take a look at my meager July income.
July was a tough month for my dividend employee Steve. He was a real lazy butt after putting in a killer June where my income was $1161.49. All that work must have tired him out as my income for July was only $52.76! Almost 100% of that was in my tax-advantaged account as only my bond fund and money market accounts paid out in July.
That’s certainly no game changer but any month that’s higher than 0 is good in my mind as even a small amount reinvested will generate additional income in the future. Reinvesting July’s income at my average yield of 2.5% will generate an additional $1.32 in yearly dividend income. That’s not a lot but add that to all my contributions for the month and we’re certainly growing dividends bit by bit each and every month!
After hitting nearly $7/hr last month, Steve’s hourly wage was back down below a dollar as he earned $.32/hr in July. These late summer months are tough for his line of work and I’m not expecting much better results in August either but hopefully business will pick back up in September.
Adding July’s total brings the yearly total to $2607.64. That means Steve’s hourly wage so far this year is $2.24 so we’re a good deal below my $4.50/hr target that I set earlier in the year.
That’s looking like it’ll be hard to hit but December is still looming and as you can see by the graph above – that’s a huge chunk of my overall yearly dividends because of my ETF/mutual fund focused investment strategy.
That’s it for July – not a great month for those of us who get most of their dividends on a quarterly basis but I’ll take anything above 0 as it all serves to grow future income stream! Hope everyone else out there had a 0+ month as well and saw their future dividends grow as well – even if it’s just another $1.
I’ll see you guys in a week for an update on my portfolio which has been looking healthy as the market continues to go up and up.
July Total : $52.76
2016 Total : $2607.64
Portfolio monthly hourly wage : $0.32/hr
Portfolio yearly hourly wage : $2.24/hr