My dividend employee Steve

Hey guys, meet Steve, my dividend employee.

dividend employee steve

Steve’s a cool guy and a real go getter.

I first met Steve when I bought my first stock in college. I forget what it was and I didn’t know it at the time but when I made that first purchase, I apparently hired Steve. I didn’t plan on it but it just happened.

Three months later, he showed up at my house to say hello.

“Hey friend,” he said, “here’s 73 cents.”

“Oh,” I said, “that’s cool, but why are you giving this to me and what am I going to do with 73 cents?”

“It’s your 73 cents,” he said, “remember that stock you bought a while back? It comes with an added benefit, a great employee like me.” 

I was thinking about whether I could fire Steve and get a pack of gum with my newfound wealth when I saw that Steve was beckoning me over while looking around to make sure no one can hear.

“I got a secret for you buddy, I’m in what you call the investment game. Don’t tell anyone though since I don’t want to be run ragged.”

“Oh?”

“Yes,” he continued, “give me back that 73 cents and I’ll make it worth your while.”

I thought about it for a minute and I decided that I didn’t really want that gum anyway.

I had invested with a long term perspective in mind and Steve seemed like a reputable guy and if he wanted to help out then I was more than willing to take the aid.

He left and I didn’t hear from him for a while.

I asked other people who were well versed with finance what they thought about Steve. They said that he’s not a big deal right now but he’s got a lot of potential if you let him do his job.

I liked the sound of that so why not give him a chance?

Three months later, he showed up again bearing gifts. This time it was a dollar. It was more than before! At this point, I had bought some additional shares and extra cash, however small it may have been helped grow those shares.

The visits continued and Steve kept showing up every few months giving me more and more money each quarter. I didn’t need the money so I just let him keep it, let him reinvest it for me and each visit meant more and more cash.

I added a few bonds to my holdings and suddenly Steve was visiting me monthly telling me about my small payments in those months.

This was right before 2008 but Steve kept visiting even as stock prices were tanking. I wasn’t worried as I had a small amount invested and saw it as an opportunity plus Steve kept coming back which was a good sign as well.

“Don’t worry about the prices,” he said, “this is the best time to buy so I’ll just take this $18 and keep buying more stock for you.”

It wasn’t a lot but each time Steve came back, I was glad to see the additional dollars flowing into my account and buying up more share. The best part about it was that each time he came, the amount of money he brought was a tiny bit higher.

I didn’t have to do any work either – Steve did everything automatically and the years passed and the stock market began growing again.

It was 73 cents at first but now it was $100 every quarter and that total got bigger each time he visited.

“Thanks Steve,” I said whenever he came around and this time he was actually getting me full shares of ETFs or stocks instead of tiny fractions.

“No problem, boss!”

He gave me a thumbs up and kept doing his thing.

dividend employee

That’s Steve in a nutshell. He’s a cool guy, he does work for me and never asks for anything back.

That’s the type of employee you want and the best thing is that we all have a Steve(or Ruth or whatever you want to name him/her) as long as we’re investing in the market.

People have asked me about Steve in my monthly dividend posts so I figured it was time to give him an introduction because of all the things he does for me.

Having an employee like Steve is one of the keys to early retirement and financial independence and is the definition of making your money work for you. The reason this works is because of the savings and dividend snowball. That theory drives portfolio growth due to continued investing and reinvesting which allows an investor collect more and more dividends and grow returns with each passing year.

Steve is the embodiment of the earning potential of my portfolio and acts as a fun little way to track my progress towards financial independence. Dividends aren’t everything and total return matters but I do like seeing how close I am to covering my expenses from dividends alone and how much my income has grown y/y.

I don’t think investing has to be super serious and Steve is a cute little way to illustrative the potential a portfolio has in eventually replacing a job. That’s the end goal here after all and a lot of us are trying to do with our investments.

I use Steve as a way to translate my dividend income into an hourly wage as if my portfolio were an employee generating revenue for me.

For the purposes of my hourly wage calculations, Steve works 250 business days and 8 hour days and delivers income each month based on my holdings. He reinvests everything for me because I’m in the growth stage right now, not in the withdrawal stage.

The income may be barely noticeable at first but the growth is substantial and speaks to the power of continue investing and reinvesting.

Steve generated over $3.50/hr in 2016 and is on pace to hit over $4/hr this year. Most of that income is earned in the quarter ending months(March, June, Sept.,Dec.) but Steve has also gotten more income in other months as my portfolio grows and I pick up other securities.

The goal here is to help Steve grow his income and have him help me smooth out any rough periods by providing income that can be reinvested through good times and bad. The ideal scenario would be a time where Steve covers all my costs and I never have to touch the principal but I’m a long ways away from that.

The $3.50/hr in 2016 was more than $7000 in annual income and was reinvested into my portfolio generating  at least $150 in forward income for me. Combine that with additional contributions in 2017 and dividend increases by companies I own and you can see why Steve is having a better year in 2017 and will have an even better year in 2018!

Right now, my goal is to help Steve grow that hourly wage as much as possible because the more he prospers, the more I proposer and that’s good new for me!

I think I love Steve’s visits even more these days now that those numbers have grown well past that initial 73 cents but even that 73 cents was important because it planted a seed that has continued to grow and will continue to grow well into the future!

If you’re just starting out, I hope this helps you see how much those initial dollars can mean and if you’re well on your way then you already know how important an employee like Steve can be for your future growth!

That’s it for Steve’s introduction. Thanks for reading and I know we all have dividend employees working for us so let me know what you call yours!

47 thoughts on “My dividend employee Steve

  1. Time, I’m tellin you, employee of the month recognition, more money and a promotion is deserved for Steve. I would even give Steve a reserved parking spot with his name on it. Otherwise someone is going to recruit that kind of talent away from you. And I’m sure you know how hard it is to find good help these days. Tom

    1. Haha, he’s already got a parking spot right outside my place and he’s won employee of the month every month since he’s been with me. Part of that might be him being my only employee but he doesn’t need to know that!

      1. You’re right, maybe I’ll take him(and the fiancee) out for dinner to celebrate!

  2. This was a really awesome and easy to understand way of explaining dividend re-investing. And it’s true small gains in the beginning lead to bigger gains in the future! Love it!

  3. I’m not a dividend investor particularly but I have a bit of stock so I have my own Steve, but since my name is Steve I’ll just call him Mini Me. He’s up to nearly $10 per hour and bucking for another raise! Very clever way to teach people about compounding.

  4. Came here from reddit. Steve’s a great way to introduce the concept of dividends to non-financial-savvy people. Thanks for sharing!

  5. I love this analogy. It’s comical but it gets a great point across – dividends are always working for you in the background. I have a couple Steve’s working for me in my portfolio as well haha. Great article!

  6. One of the best arguments for dividends I’ve seen in awhile. I love receiving dividends and interest (even though I seem to get slammed when I blog about it). Having money work for you is awesome!

  7. Steve is a good guy and great employee. He has been working for me for a number of years. As time goes by, he becomes more and more productive. Everyone should hire Steve. He even works when you are off. I would gladly write him a letter of recommendation.

  8. Fantastic way to describe how building a portfolio of dividend stocks can be thought of as an employee out working hard for you each and every day!

    I am in the process of teaching my 14 year old about investing in dividend stocks. He has earned $5.93 this year in dividend income and I have told him that will grow to close to $10 next year if he keeps investing his birthday and allowance money.

    Thanks for sharing this!

    1. Awesome that you’re starting with him so early. I bet he’ll really appreciate that later on in his life!

  9. When starting out, won’t the commission erode the value of reinvesting the dividend? I love the concept but it seems inefficient.

    1. Doug, most brokerages and stocks/funds/ETFs have a DRIP(dividend reinvestment plan) which means the dividend is reinvested automatically into new shares without any commissions so you’re dollar cost averaging each time with no cost on your end.

  10. I call my employee Charles. My dad taught me about Charles when I was in my early teens and how if I can just let Charles do his thing i’ll be better off. I didn’t understand it then and at times I had actually forgotten about him. Lately I have been learning to appreciate more and more how hard Charles works and he has become my favorite employee and a dear friend. Great post.

  11. Steve is continuing to work his magic for you every single day. Must be nice to have a worker like that 🙂 Keep Steve happy though. Keep feeding him so he can work and bring you ever more dollars each month. Keep up the good work!

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