My Goals

My personal goal is to have $8,000 in annual dividend income in 6 years. I would achieve that by investing an equal portion of my regular paycheck every month and reinvesting the dividend income. I would try to focus on high-yielding stocks, which increase their dividend payments over time. I try to cut my trading costs by switching to Zecco, which doesn’t charge you a commission once your account balance is over $2,500 and you don’t make more than 10 trades per month. Achieving $8,000 in income is feasible depending on the amount of money you have invested as well as the yield on invested capital that you can achieve. Assuming that I have about $100,000 invested in 6 years, I would have to own assets yielding/earning 8% annually. If I have $200,000 invested at the time I would only need a 4% annual yield. I believe that this is a very conservative goal since I will have two powerful allies that would help me reach this goal - dollar cost averaging and dividend compounding. I won't put the money into a 401K or a ROTH IRA, because I plan on using them in 6 years. If I put all the money for my dividend growth strategy in a retirement account, i won't be able to use the passive income when I want or need it.

Currently I am also contributing at a 401k plan though, which matches 100% of the first 5% of my income that I contribute. I am moderately diversified – 95% stocks and 5% bonds. 75% of my portfolio is invested in SP500, 10% in MSCI EAFE, 10% in Russell 2000. 2.5% of my 401K is invested in high-yielding bonds and the other 2.5% is invested in corporate bonds. I would continue contributing to my retirement accounts as well, which would grow tax free for 30 years or more.
I also have the option of contributing up to 25 % of my income into my employer stock participation plan, which allows me to buy company stock at a 10% discount and there’s no minimum holding period. I could simply elect to contribute 25% of my paycheck to the plan each quarter, buy the stock at quarter end and achieve an 11% quarterly return on investment!
As of now I have over 80% of my assets invested in certificates of deposit earning me around 5% per year. As they start maturing I would start investing these funds into dividend stocks that fit my buy criteria. I currently earn around $1,000 annually from interest income from these CD’s. The thing that turns me off from CD’s is the taxation of CD income as ordinary income versus the 15% tax rate on dividends. In addition, my stock investments would provide me with an income stream that is growing without having to reinvest any of my payments (in case I have to live off of them). I plan on retiring in 6 years and moving to Bulgaria, a beautiful country in East Europe, which recently joined the European Union. A dollar in Bulgaria buys much more stuff and a dollar in US. The average salary is about $500/month there, but rents in big cities might go as high as my rent in the Kansas City area.

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