Monday, January 5, 2015

How to reach your dividend income goals?

The goal of every dividend investor is to reach their dividend crossover point, which is the time when financial independence is attained. Many articles provide sources of inspiration touting the advantages of dividend stocks, while others show how to select the best dividend stocks at the best prices possible. Other articles focus on high yield, low yield, or a combination of all of them. Few articles however provide a concrete and actionable plan on how to utilize everything you know in order to reach your goals.

There are three key factors that can determine whether someone can retire with dividend paying stocks. In general, in order to be able to retire with dividend stocks, investors need to have a starting amount of capital to commit to the strategy. If they do not have a nest egg available, then the aspiring dividend investor would have to dedicate themselves to patiently building their portfolio of income producing securities, one stock at a time. This process takes time, and requires plenty of patience in order to build wealth. It also takes a lot of dedication to save money these days, rather than spend it on frivolous purchases such as new cars, big homes, expensive vacations or big screen TV’s.

Let’s look at a scenario where we have a dividend investor with zero assets, who commits to saving $1,000/month. This investor chooses to focus on dividend paying stocks yielding 4% at the time of purchase, which grow distributions at 6% annually. Our investor decides to reinvest distributions, in order to be able to compound distributions growth more rapidly.

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Full Disclosure: Long all companies listed above

Relevant Articles:

Diversified Dividend Portfolios – Don’t forget about quality
How to increase your dividend income
- Successful Dividend Investing Requires Patience
How to turbocharge dividend growth
My dividend crossover point

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