“I’m pretty sure you are interested after reading the headline. Anyone, without a doubt, would love to have their favorite subscription (Netflix, Hulu or Amazon prime) free for life. But do you want it so bad that you are ready for the extra efforts you’ve to put in?
Let’s start with my story:
After the birth of my boy, Rhythm, I and my wife decided we need to join an activity club where we can take him to socialize and exercise. We think it is essential for his physical and mental growth. This means a monthly club membership or subscriptions.
As much as I wanted to join the nearby gym where they have pools, kids indoor play group and learning center, I didn’t like the idea of paying them every month. We needed a family membership (higher than the normal fee) so that my wife can work out and loose the stubborn calories that she added during the pregnancy.
At this time my wife had already left the job to become stay home mom full time (or should I say over time?). I needed to find a creative way to manage the subscription, so that it does not eat away our bank balance. What could be the best way to sign up for subscription (monthly $100 to $200) and at the same time does not hurt our wallet? A light bulb went inside my head – Dividend investing!
Table of Contents
What is dividend investing?
Dividends are payments issued by a company to the investor for owning the shares of the company. The yearly dividend is usually certain percentage of the total stake that he/she has in the company. This percentage is called dividend yield which is the percentage of dividends for every dollar of stock.
Dividend investing or dividend stock investing is an investing strategy on the stocks that pays out good dividend either monthly or every quarter. As a dividend investor, an individual will look for a good dividend paying stocks in order to receive a cash flow (either monthly or quarter or annual) regardless of where the stock trades at. The dividends are received in additional to capital gains on the investment.
Dividend investing for income
Most of the dividend investor are looking for a consistent (not always guaranteed though) income regardless of the market fluctuation on stock price. The cash flow is collected from the investment on the stock with dividend based on its dividend yield. The dividend is extra income being generated for holding the stock.
How to start dividend investing?
The best way to start dividend investing is finding the strong stocks with good dividend yield. Choosing a stock with high dividend yield is not always the right choice. One also needs to find the stock with good financial records. The best way to filter through is finding a good dividend paying stock and select based on the company’s financial evaluation. You can either choose stocks with quarterly dividends or opt for a monthly dividend stock. The real estate stocks are the perfect choice for monthly dividend stocks.
How long do you have to hold the stock to get dividends?
The one big factor that determines whether you’ll receive a dividend or not is the date when you acquired the stock. The stock will have a declared dated called ex-dividend date and any shares of stocks acquired on or after ex-dividend date is ineligible to receive the declared dividend.
To receive the dividend payout, you have to acquire own the stock before the ex-dividend date and keep it until the dividend payout.
Dividend income to pay bills
After working for almost two years, my wife decided to retire when she was close to delivering our boy. She wants to become full time mom. She retired with $30K in her savings account. It’s not a lot of money therefore we could not afford to spend it.
I told my wife about my strategy with dividend investing and how I want to use her money to invest in dividend stock to pay off our gym membership. She was not convinced. I created an excel spreadsheet (Click here to download the excel file), with the list of stocks I was going to invest and the share quantities I needed to purchase, in order to provide us consistent income. This consistent income will pay for the $100 gym membership. And the best part to it is, her principal will not decrease. It will appreciate with time. The money will be sitting in her saving account (collecting pennies in a year) any way, if she decides to keep it to herself.
She liked the idea but promised only to transfer $20K. She wants $10K as her emergency fund. I agreed and our journey to dividend investing kicked off.
Since that day, we have not paid for our gym membership with our earned income (except the first two months). We put our earned income to work for us to generate consistent dividend income. We setup the bills pay in our brokerage account to transfer monthly dues to the gym. Therefore, the process is automatic. Dividend investing is such a powerful investing technique that everyone should use to their advantage. Dividend growth investing is another strategy which we can discuss in some other post.
She liked the idea but promised only to transfer $20K. She wants $10K as her emergency fund. I agreed and our journey to dividend investing kicked off.
Since that day, we have not paid our gym membership with our earned income (except the first two month). We put our earned income to work for us to generate consistent dividend income and we setup the bills pay in our brokerage account to transfer monthly dues to the gym. Therefore, the process is automatic. Dividend investing is such a powerful investing technique that everyone should use to their advantage. Dividend growth investing is another strategy which we can discuss in some other post.
