After 33 years of clocking in and out of work and religiously saving 10% annually in my 401K every year, in good times and bad, I have decided to share my monthly dividend income to show what regular saving and investing can accomplish.
For the month of December I made $4,324.88; an increase of +39.93% versus this time last year. I was hoping to hit my very first $4K month and was shocked when I blew by it by $300.
My buying in large quantities has slowed down quite a bit since November as valuations rose significantly across the board. I’ll continue buying in small lots and going into January here are the stocks on my watch list; AbbVie (ABBV), Allete (ALE), BCE Inc (BCE), J.M. Smucker (SJM), Lockheed Martin (LMT), 3M (MMM), Unilever (UL), Verizon (VZ) and Walgreens Boots Alliance (WBA).
Looks like I’m ending the year on a whimper with just a few small buys. I usually have little to no cash at the end of a year but this time I will be carrying over a sizeable cash position into the new year. Here is a summary of my trades:
Verizon (VZ) – increased position – This buy is part of my efforts to increase my overall dividend payout in the second month of a quarter which is considerably lower than the other months. Grabbed 3 shares at $58.15 and a 4.33% yield
Oil-Dri Corporation of America (ODC) – increased position – This buy was also part of my efforts to increase my overall dividend payout in the second month of a quarter. Grabbed 5 shares at $33.55 and a 3.10% yield.
Treated myself with some early Christmas presents. Here are my trades for the week:
BCE Inc. (BCE) – increased position – 6.1% from this Canadian company was enough to make me go H! Ho! Ho!
Oil-Dri Corporation of America (ODC) – increased position – Having a significant snow storm before Christmas was a good reminder to keep kitty litter in the car and to buy more ODC for a 3.04% dividend yield.
Bar Harbor Bankshares (BHB) – increased position – 4% yield and I’m hoping for a dividend raise announcement in February around 10%. Hopefully Santa is listening and I have been a good boy this year…
Routinely in my posts I state how I have consistently saved 10% in my 401K and I would like to take a moment to walk through how this was successful for me but may or may not work for you.
My Retirement Plan Has Never Changed (Retire at Age 60) – Back in 1987 when I first started saving there was no concept of FI/RE. At that time, a well-planned early retirement was considered to be age 60 and for extremely successful people it was 55. I focused on age 60 and never deviated.
I was Always Invested Heavily in Stocks – In the early years, 401K plans did not offer a wide array of investments. My plan had a whopping 6 choices. I chose to invest 90% into a large cap growth Fund and 10% into a bond fund. Once a year I would rebalance to keep the 90/10 ratio. As the years progressed my 401K expanded their investment options, and I was told more than once I should diversify into more investments. I really did not care for spreading out my funds and liked the simplicity of the two-fund portfolio.
I Never Withdrew Money – This one is self-explanatory. Regardless of how financially in trouble we were at times I never once withdrew a dollar. I also forced myself to fix my financial problems through other means like cutting expenses, working over-time, or taking on part-time jobs. To me my 401K money was for one thing and one thing only, it was not a personal piggy bank.
I Had Time on My Side – The most powerful reason why saving 10% was successful can be boiled down to time in the market.
Here is a graphic from a July 2020 Fidelity article that shows the recommend savings rate at different ages. The graphic depicts the earliest age of 25 with a 15% savings rate and that is where my advantage comes into play. I started saving 10% at age 19, I had a 6-year advantage!
I wish I had saved all my annual 401K statements but alas I did not. However, I was able to recreate my portfolio performance thanks to Portfolio Visualizer which had the two mutual funds I invested in starting from 1987 and was able to chart from the end of 1987 to the end of 2015 (I took my 401K rollover in Jan 2016).
When I first started my career, I was making a $15,000/year plus whatever over-time they would throw my way. Putting this in context, it would be closer to $34,000/year in today’s dollars. But heck I did not care back then, I was 19 with money in my pocket to burn. So even starting out with a small salary I was still able to build a sizeable balance (~$400K) by the time I rolled it over and the average annual return was 9.76%. At this growth rate, I was on a path towards $1.3M by age 60 without adding any additional funds.
However, saving 10% was not the best for me or my family either. As a young adult I greatly underappreciated the cost of life and in particular family life.
When I first started saving, I thought all I needed was a 401K, a little bit of emergency cash, and a down payment for a house. The rest I spent on fun. The reality of my lack of planning for life events set-in when my wife left the workforce to raise our children full-time. I was unprepared financially to support 3 children and a wife on just one salary and it started a slow spiral into debt which we did not climb out of until my wife returned to the workforce in 2017.
Looking back, I wasted a lot of money on having fun during my single and early marriage years. If I had to do it again, I would have kept the 10% 401K contribution and I should have been also saving another 20% in a brokerage account for life’s little needs for a total savings rate of 30% and dialed it down to 10-15% after the kids were born. I obviously cannot go back in time so all I can do is chalk it up to experience.
The Dow & S&P 500 refuses to go back below 30,000 and 3,650 . Absolutely amazing the market has kept it’s momentum for a month. With few opportunities available here are my trades for the week:
AbbVie Inc. (ABBV) – increased position – This buy is part of my efforts to increase my overall dividend payout in the second month of a quarter which is considerably lower than the other months. Grabbed 3 shares at $102.66 and a 5.06% yield
Ventas Inc. (VTR) – sold position– I bought this during the market crash in March but at the time could only afford to buy $250 worth. VTR since has slightly more than doubled and being such a small position I sold out and collected $561 (plus $9 in dividends). Luckily this trade was in my IRA so it did not trigger a taxable event.
WP Carey Inc. (WPC) – increased position – Using the funds from my VTR sale I reinvested back into old reliable WPC. Late Friday the stock price came back down below $70 a share so it was an opportune moment.
Markets continue to hold onto their gains making dividends expensive. The few bargains available I already have a full position in so no need to buy more. Until things cool off I am content to just keep adding money to my brokerage and build up some dry powder. Here is my only trade for the week:
OGE Energy Corp (OGE) – increased position – 13 years of dividend growth and a 5% yield. I decided to just finish this one off and have a full position and bought 27 shares to top off my investment.
Markets just keep inching higher and higher and another week of light trading for me as stocks on my watchlist stayed well outside my buy zones. Until things cool off I am content to just keep adding money to my brokerage and build up some dry powder. Here is my only trade for the week:
Oil-Dri Corporation of America (ODC) – increased position – For a brief moment on Monday the stock price dropped to the upper end of my buy range and I picked up 6 shares. ODC has grown their dividend for 18 years, a debt to equity ratio of 7% and I nabbed a 3.0% yield.