Thread Rating:
  • 0 Vote(s) - 0 Average
  • 1
  • 2
  • 3
  • 4
  • 5
Hi all
#1
Hey everyone! Looking forward to joining the dividend community here. I'm 24 and working towards financial independence to get me out of the rat race! My interest in building wealth began a few months ago when I discovered the personal finance subreddit and decided to get the student debt monkey off my back. I quickly learned about index investing and started to learn everything I possibly could about FI and early retirement. I discovered DGI as an alternative strategy, and have really been looking into it over the past month. In particular, I LOVE the idea of being able to live off of your investments while never having to dip into the principal (after all, we do all the hard work of building it up Big Grin )

I don't have a portfolio yet, as I've been focusing on paying down credit card debts, but after tax season I think I'll be ready to pull the trigger! I should have around $2k/mo to invest. I've built up a mock portfolio and I wish I had more capital as everything seems to be on sale right now Smile

I'm really interested in developing a system for valuing not only companies, but their dividends and dividend growth as well. I've seen a number of you on the forums have strategies you use, and I'd love to learn. Looking forward to learning and growing with all of you moving forward.

-CD
Reply
#2
Welcome to the forum, CD.
Your future self will thank you for starting this early. It took me a while and by the time I figured out the power of dividends and DGI I was close to 30. I have already made some great progress since then, but if I had started at 24-25 I would be that much more ahead. But never late than never as far as Im concerned. But getting back to you, great to have you on board. Ask away and there are some very smart folks on this board to help you out.

Paying down credit card/high interest debt is definitely the first step. Make sure those and other expenses are under control before you start putting money away to invest.

cheers
R2R
Reply
#3
Welcome to the forum, CD -- glad you found us and signed up. It definitely sounds like you are doing all the right things. Especially the learning! $2k per month will give you a healthy start.
Reply
#4
R2R, Kerim, thanks for the welcome Big Grin 

R2R I actually just knocked out the final bits of my CC debt last month so all I have left are the student loans (~40k Rolleyes ) My savings rate is about 65-70% right now so I'm splitting my savings between investments and debt reduction (antsy to get that snowball rolling). One thing I was curious about is how fast will the dividend income grow. I've seen people reporting numbers of 10k, 20k and higher and I wonder how long it took to build a portfolio like that. I recognize that it's going to be unique to everyone's situation, but having a foundation for calculating yearly dividend payouts would be great.

Furthermore, and maybe you guys would like to chime in on this, it would be interesting to see how dividend stocks compare to capital growth stocks. It seems to me that DG stocks are a bit like having your cake and eating it too, but there must be something I'm missing. perhaps capital gains grow more quickly?
Reply
#5
(01-12-2016, 04:10 PM)ClockworkDividends Wrote: Furthermore, and maybe you guys would like to chime in on this, it would be interesting to see how dividend stocks compare to capital growth stocks. It seems to me that DG stocks are a bit like having your cake and eating it too, but there must be something I'm missing. perhaps capital gains grow more quickly?

My answer to this one is that I would gladly switch to growth investing in a heartbeat, if someone would just lend me their crystal ball for a little while. If you can consistently pick the right growth stocks, and buy and sell them at the right time, you'll trounce dividend growth investing (and most other strategies as well). But it is a nearly impossible task, and even more so for those of us with families and jobs and the such. One of the main advantages of DGI is that it is a fairly easy and forgiving strategy that can be successfully used by us mortals.
Reply
#6
(01-12-2016, 04:38 PM)Kerim Wrote:
(01-12-2016, 04:10 PM)ClockworkDividends Wrote: Furthermore, and maybe you guys would like to chime in on this, it would be interesting to see how dividend stocks compare to capital growth stocks. It seems to me that DG stocks are a bit like having your cake and eating it too, but there must be something I'm missing. perhaps capital gains grow more quickly?

My answer to this one is that I would gladly switch to growth investing in a heartbeat, if someone would just lend me their crystal ball for a little while. If you can consistently pick the right growth stocks, and buy and sell them at the right time, you'll trounce dividend growth investing (and most other strategies as well). But it is a nearly impossible task, and even more so for those of us with families and jobs and the such. One of the main advantages of DGI is that it is a fairly easy and forgiving strategy that can be successfully used by us mortals.

Ah that makes sense. I was reading the other day that DGI companies tend to do well as far as capital growth goes as well, since we aim to choose companies that have solid fundamentals and consistently grow their dividends (which is supported by consistent growth in earnings). What if one say, sold off a portion of their biggest growers (in terms of stock price) and used those to buy more undervalued growth stocks. Wouldn't that theoretically grow real returns over time by leveraging both the compound growth of reinvesting dividends AND the capital gains of the stocks themselves? Why not leverage both strategies?
Reply
#7
(01-12-2016, 05:02 PM)ClockworkDividends Wrote:
(01-12-2016, 04:38 PM)Kerim Wrote:
(01-12-2016, 04:10 PM)ClockworkDividends Wrote: Furthermore, and maybe you guys would like to chime in on this, it would be interesting to see how dividend stocks compare to capital growth stocks. It seems to me that DG stocks are a bit like having your cake and eating it too, but there must be something I'm missing. perhaps capital gains grow more quickly?

My answer to this one is that I would gladly switch to growth investing in a heartbeat, if someone would just lend me their crystal ball for a little while. If you can consistently pick the right growth stocks, and buy and sell them at the right time, you'll trounce dividend growth investing (and most other strategies as well). But it is a nearly impossible task, and even more so for those of us with families and jobs and the such. One of the main advantages of DGI is that it is a fairly easy and forgiving strategy that can be successfully used by us mortals.

Ah that makes sense. I was reading the other day that DGI companies tend to do well as far as capital growth goes as well, since we aim to choose companies that have solid fundamentals and consistently grow their dividends (which is supported by consistent growth in earnings). What if one say, sold off a portion of their biggest growers (in terms of stock price) and used those to buy more undervalued growth stocks. Wouldn't that theoretically grow real returns over time by leveraging both the compound growth of reinvesting dividends AND the capital gains of the stocks themselves? Why not leverage both strategies?

Welcome to the forum.  This theory can work, but you might need to dust off the crystal ball again.  I don't do this personally since I don't want to sell my dividend payers and buy stocks that I'm hoping that will go up in price.  To me, the worst thing I could do would be to sell a great dividend aristocrat like JNJ and buy the next up and comer only to see it go down in flames.   Also with a family, I don't have the time to research the growth stocks and watch them constantly.
Reply
#8
Hi CD,
To answer your other question on how much will you bring in at the start and how long will it take to reach $10K or $20K...it depends (as is the answer usually).

To start off, your dividend will be very low - so the first year or two can be a bit discouraging and it might seem like its not worth it. But as you build your portfolio - your income will grow and gets compounded over time. Addition of new money coupled with the increase in dividends will keep that income growing.

When I started off, I used a rule of thumb for projections (just for the sake of managing my expectations) as an average starting dividend yield of 3% and growing at 7-8% per year. So, for e.g., if you invest $10K now, with those assumptions you can expect to make $300 in dividends the first year, $324 next year etc. Hope that gives you an idea.

I also made sure that I had a wide spectrum of dividend payers in my portfolio. Some companies with low starting yield but high growth of dividend rate (look at companies like SBUX, V, DIS etc), and some companies with a high starting yield and low dividend growth rate (companies like T, VZ, SO etc) and then some companies which fit right in the middle with decent starting yield and decent dividend growth rate (companies like JNJ, WFC etc).

Read as much as you can. Pay close attention to diversification and never put eggs in one basket no matter how lucrative an investment might seem and may appear to be a once-in-a-lifetime opportunity.
Hope that helps.
Reply
#9
Welcome to the forum. I wish I had started when I was 24. Good for you. Also, having $2k/month to invest puts you well ahead of most people. When I first started, I focused on building up my core holdings. Steady, solid, healthy companies first.
Reply
#10
Welcome. Glad to see yet another young person joining us, it's best to start early!

One thing I would like to correct you on though. You said that everything seems to be on sale... well yeah it looks like that when looking at the past few months or a year but when you take a look over a longer timeframe you will see that a lot of the numbers don't seem that cheap afterall. Sure there are some good ones but in general the P/E doesn't seem to be that cheap compared with historical P/E numbers. Most of us tend to buy a little all the time but of course be careful not to spend too much right now because it looks cheap.

I started when I was 23 and been doing this a few years now. I didn't have as much as $2k per month to invest so you can expect your dividends to grow a little faster than mine did. Here is how it went for me.
2012: 111.60 euros
2013: 993.47 euros
2014: 1557.78 euros
2015: 1783.10 euros
2016: estimate is around 2100 euros.

All of that is before taxes. So as you can see it goes up, you will probably manage it faster than I did as you have more capital to invest but that should give you some example of what it can look like.
Good luck with it and keep us updated! Smile
Reply




Users browsing this thread: 1 Guest(s)