I’ve been tracking my dividend/income account for some time, to see how I could create an income stream out of my investments, rather than just depending on growth stocks and selling them off as I move through retirement and use my bucket system. The old traditional way was to use dividend paying stocks and bonds to live on (reinvesting some of them to keep up with inflation).
This worked for many years, until the dot.com bust and the “great recession,” when the US Fed dropped interest rates to try and keep the economy out of recession and to fend off deflation – A terrible economic situation, where prices tomorrow will be cheaper than today. When you get a continuous time period of deflation (see America’s great depression of the 1930s) its hard to get the economic engine going again. Folks wait to purchase, because it will be cheaper tomorrow.
Well, due to low interest rates, US stock dividends and bond dividends have been small pickings, and the result is difficulty for folks who want to follow traditional ways of investing their retirement money and drawing down. As I noted at the beginning of the year, my attempts haven’t been that good.
In the early part of the year, I chose to ditch my bonds in the account (which made up 50% of it) and go to a 50/50 split of dividend stocks and REITs. Yes, I know, great timing! So how has it gone for the first quarter? Not bad from a dividend standpoint, but sucky from a stock value standpoint.
|stock||Details||Investment value||Annual Yield||Dividend|
|IBM||International Business Machines||$5,400.00||6.00%||$81.00|
|O||Realty Income Corp (REIT)||$9,086.00||5.10%||$115.75|
|SVC||Services PPTYS TR||$2,604.00||24.88%||$162.00|
So I cashed in $1,414 in dividends in 1st qtr 2020 versus only getting $1,192 in 1st quarter 2019 – an 18.6% increase in income (not too shabby). However, 1st qtr 2019 investments were worth $132,151, so that was painful. However, if the objective was to get and live off the income, I could let the investments sit there and move back up. I’m not sure if these companies will cut their dividends in the new year, we’ll have to see.
So the experiment continues. Right now, I still think investing in index funds and going for growth is the better way to go, and that is where the lions share of my investments are.
Mr. 39 Months