Dividends: Do Nothing, Get Paid, Repeat

Dividends: Do Nothing, Get Paid, Repeat

Last month, my wife and I earned over $500 without any effort on our part. While this alone is great news, it actually gets better! This wasn’t just a one-time payment. Sometimes the amount is more and sometimes it’s less, but we receive payments like this EVERY SINGLE MONTH! Dividends: Do Nothing, Get Paid, Repeat (white text)

Does this money just magically appear out of thin air? Not quite (that would be cool though). Have we been diligently following a structured process for the past several years to get to this point? You already know the answer is yes!

The best part is that you can follow the same simple process to achieve very similar results! I know this might sound like a bad radio commercial, but I promise I’m not trying to sell you anything. I’m only trying to help illustrate the fact that you can have your money work for you so that at some point, you no longer have to work for it.

In a previous post, I noted that dividends are our preferred source of passive income. You can also read that post to understand our rationale and to learn about additional opportunities available for earning passive income.

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Our Progress to $5,000 in Annual Dividends

At the beginning of the year, Nicole and I set a goal to earn $5,000 of dividend income this year in our taxable accounts (since we won’t be able to use the dividends provided by our tax-advantaged accounts to replace our income until we are nearly 60 years old, we don’t include them in the calculation). When we originally set the goal, we thought that it might be a bit of a reach, but we wanted to have a concrete goal to hold ourselves accountable. Check out the chart below to see our progress.

chart of monthly dividends received

Through the end of September, we’ve received $4,420 in dividends in our taxable investment accounts. If we take a monthly average of that figure, it comes out to about $491 ($4,420 / 9). On a yearly basis, that amounts to almost $5,900 ($491 x 12). We are both really excited to see that we are on track to exceed that $5,000 mark!

How Can You Start Earning Dividend Income?

Earning dividend income essentially requires no skill on your part. All it takes is a little bit of time up-front and the dedication to stick to a plan.

Opening an Investment Account

Based on my experience and what I’ve been hearing from readers, it only takes about 15 minutes of your time to submit an application to open an investment account online. If the thought of opening an investment account still sounds intimidating, please know that there’s nothing to be worried about. I even created a blog post to help guide you through the process of opening an investment account.

Staying Dedicated to Your Plan

After your account is open, the next step is to decide on the funding amount and frequency. To make it easy, I recommend setting up a schedule so you contribute a certain amount at regular intervals. Nicole and I aim to contribute at least $1,150 to our taxable accounts each month. By setting a firm target, we can regularly review our progress to make sure we are on pace. Please know that your goal doesn’t have to be nearly as ambitious. Even saving $25 or $50 a month will accumulate over time!

For example, if you were to open an account and invest $50 a month into an index fund that tracks the S&P 500 for a year, you would earn about $10 in dividend income every year thereafter (using the current dividend yield of about 1.7%)! After that first year, those dollars you contributed would recruit more dollars, which would recruit more dollars, which would recruit more dollars, . . . and the power of compound growth should drastically amplify your results.

Our Dividend Goals for 2021

Even though we don’t want to lose sight of this year’s goal, Nicole and I have been discussing some of our targets for 2021 (like many of you, we’re hoping that it doesn’t look a whole lot like 2020). While there are certain things that we know we can’t control, we feel like the amount of dividend income we earn is something we have a major influence over. There is a direct relationship between the amount of money we contribute to our accounts and the amount of dividend income we receive. We are striving to be ambitious and we want to create a goal that’s going to be challenging to reach. That’s why we are aiming to DOUBLE our dividend income from $5,000 to $10,000 next year!

Is it going to be a stretch? Most likely. If we fail to reach that $10,000 figure will we still be making incredible progress along the way? Without a doubt.

If we are able to achieve our goal, it will be equivalent to replacing $27 of earned income each day, for all 365 days of the year. I think looking at it from that perspective is so cool!

In order to accomplish this goal, we are going to need to drastically increase the amount we are investing each month. We haven’t quite yet determined what that figure should be, but I’ll let you know when we do.

Your Thoughts

Are you a dividend investor? If you are, why do you like dividend investing?

If you have any suggestions for future blog posts, please use the Your Thoughts page to reach out.

Be sure to subscribe to the mailing list so you have a chance to win future giveaways and so you don’t miss out on future content.

If you’ve ever been curious about what I’m investing my money in each week, check out the “What’s in Stock” series and subscribe to the Nicholl for Your Thoughts YouTube channel! The first four “What’s in Stock” picks have increased our annual dividend income by over $230!

Your thoughts are worth more than a penny.

This Post Has 12 Comments

  1. Kristine Gustke

    I have a question about stocks that pay dividends. I was thinking about this question and then you did address the subject in this week’s YouTube video before I had a chance to ask. Please excuse if it sounds like an easy answer, but I consider myself below a novice in all of this. So, the question, how do you know if a certain stock pays a dividend? I know you mentioned some that did, but is there a way for the untrained person to tell?

    1. Noah 5¢

      Regardless of how simple or difficult the concept, I’ll do my best to give an answer, so please ask whenever you have a question! To tell if a particular stock pays a dividend, you can use a resource like Morningstar (https://www.morningstar.com) or use the research tool provided by your broker. Alternatively, you can do a Google search for the stock (just type in the stock’s symbol followed by the word “stock”). Google should pull up a chart for the stock and beneath the chart one of the data points will display the dividend yield. If the dividend yield is greater than zero, the stock pays a dividend! Google usually has updated information, but always double-check using an alternative source too. Thanks for the question!

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