Dividend Growth is Psychological

Throughout the years I have tried to quantitatively justify my attraction to dividend growth investing to both myself and others.  However, I never felt 100% satisfied with my explanations.  It is not that I did not believe the math & analysis or the books, articles and studies I have read on the subject. I just knew there was something else and my conclusion at the end of the day is that psychologically it comforts me.

Through self-reflection I have come to the conclusion the reasoning why it is psychologically comforting is simply a reflection of the environment I was raised in.  Since my earliest memories of childhood, I have been told that to be an adult you need to earn a regular paycheck and pay bills.  This is what I was taught by both my parents and educators.  This is how children’s books, cartoons, media, and movies depicted adults.  When I looked around at other adults (Aunts, Uncles, friends, etc..) this is what everyone else was doing, this was and still is the social norm.  Essentially, I have been psychologically programmed to expect a regular paycheck and to pay my bills every month.

This psychological programming explains why I was struggling to envision how to drawdown my wealth when I hit financial independence or retirement.  For me, saving a pile of cash was intended for buying something or to have in emergencies.  But to use a pile of cash to drawdown from to pay for day-to-day expenses was just difficult to get my head around.  My only choices were to either break my programming or find a different alternative.  I obviously choose the easier of the two paths and went to the alternative by using dividend growth investing which focuses on investing for cash flow. 

A growing cash flow felt like such a natural replacement for a paycheck.  I would get regular disbursements and the dividend growth aspect was like getting an annual raise at work.  Mentally this was a replacement for what I have been doing for the last 35+ years.  I completely understand that if I embrace a total return investing style (equity growth + dividends) my wealth might be greater however I also want to be mentally comfortable in so much that I have the luxury of focusing on other things in life and not money.   This is the number one reason why I chose and will keep continuing down the dividend growth investing path.  From my perspective I would rather spend my energy on other things in life rather than undoing my programming. Yes there are risks with this investing style but there are risks with any investments and that is okay if you recognize what they are and plan for them accordingly.

Today we are in a bear market with the S&P down 20% and the NASDAQ down 28%.  For young investors that have never experienced a bear market it seems like the worst of times.  For older investors it feels like retirement just moved that much further out.  For retirees that did not have a significant cash position now face a risk of cashing out more shares than they planned.  But as a dividend growth investor my dividend income is not down 20 or 28%.  As a point of fact, my June dividend payments this year will be larger than last June and next year’s payment will be larger than this year.  This is a comforting feeling and leads me to a feeling of being simply content.  Being content I can relax and enjoy the simple things in life while not stressing over finances.  What is your motivation for choosing dividend growth investing?

Living off a 100% Dividend Growth Portfolio May Have Risk

The idea of living off dividends and not touching the principal is always an appealing thought and I judge no one negatively for striving towards this goal as long as they enter the journey eyes wide open.

The two counterarguments to income investing I hear regularly are 1. What happens when dividends are cut? and 2. What about inflation?   In response to these two questions is the Dividend Growth Strategy and then the debates go on from there.  I am a big supporter of Dividend Growth but also grounded in the reality that it is not risk free. 

The two counterarguments have some merit albeit not as much of a “gotcha” moment as critics think.    As for dividend growth investors, the day you decide to retire and live off a portfolio with a 100% allocation to dividend growth stocks you may have just exposed yourself to a Sequence of Returns risk.

The best example to demonstrate this would be the 2008 great recession as the collapse of the financial industry had the largest effect on dividend cuts in the markets.  The Vanguard High Dividend Yield Index Fund (VYM) will be used to represent a basket of dividend growth stocks that generates $20,000 annually in dividends for someone that decides to retire on January 1, 2008.

From its dividend high of 2008 to its lowest point in 2010 our retiree would have seen their annual income from VYM drop from $20,000/yr to $15,120/yr.  If the retiree can figure out how to cut expenses and live on the reduced amount their reward for their sacrifice would be a return to the $20,000/yr mark in just 3 years.  However, if the retiree cannot cut expenses, we now run into a sequence of returns event.

The only way to meet their expenses a retiree begins to sell-off equity to cover the gap in dividend income.  However, selling stock reduces the amount of equity that can benefit from the dividend increases from 2011 to 2013.  Our retiree ends up selling off circa $11K of their portfolio and loses $460/yr in dividend income.  It now takes just over 4 years for the annual dividend income to recover.

Total Equities SoldLost Dividend IncomeYears to recover
No to Low Inflation$10,758$430.344

Luckily for the retiree inflation was non-existent to low during this time which allowed for a decent recovery.  But what would have happened if the first 3 years of the recovery period there was 8% annual inflation and then 2% annual inflation every year after that? With an 8% inflation rate our retiree would have ended up selling circa $19K of their portfolio and loses $756/yr in dividend income.  It now takes our retiree 7 years for the annual dividend income to recover.

Total Equities SoldLost Dividend IncomeYears to recover
No to Low Inflation$10,758$430.344
8% Inflation (first 3 years)$18,893$755.707

While the dividend income may have recovered in the short-term, it may cause a shortfall long-term.  That $756/yr in dividend income loss will never participate in future dividend growth and can throw a monkey wrench in where you thought your income might be 20 years down the road. Without that $756/yr earning dividend growth you potentially decrease your annual dividend by $3,500/yr 20 years down the line.

The easiest way to mitigate this risk is the same as in any other portfolio and that is with cash.  If the retiree included a cash position as part of the portfolio equal to 1 year of dividend income the cash could have been used to fill the gap until dividend recovered allowing all your original equity to benefit from a rising market.

Total Equities SoldLost Dividend IncomeYears to recover
No to Low Inflation$10,758$430.344
8% Inflation (first 3 years)$18,893$755.707
Portfolio w/1yr of Cash$0$03

The other option that could have mitigated this scenario is if dividend income greatly exceeded your expenses (by at least 30%) at the time of retirement.  While some may achieve this mark, the bulk of investors probably will not and should not plan to have a portfolio 100% dedicated dividend growth stocks but include some allocation to cash.

While an almost 25% dividend cut is difficult to live with, when you put it in perspective to the S&P 500 which during that time it dropped 56% and took 5 years to recover in a no to low inflation environment.  The amount of cash you need allocated to offset that would have greatly exceeded what a dividend growth investor needed to avoid a sequence of returns risk (imagine a cash position anywhere from 2 to 4 years of annual expenses).

Why I’m not a fan of Annuities

While perusing finance articles I came across one from MarketWatch called “Why don’t retirees like annuities?“. The article touched on the most common issues that annuities are not flexible, can be complicated to understand and laden with excessive fees. Without a doubt these are serious concerns for investors but the article did not address an additional concern I have with the total actual payouts.

Annuity salespeople are extremely pushy. Besides sidestepping any disclosure about commissions and fees they also dodge the question of how much money will actually be paid out over a lifetime. Instead they redirect you to a % that your money will return and how great it is because you can’t get a guaranteed income at that rate anywhere. But who exactly is it great for? You, the Salesperson, or the Insurance Company?

To answer this question lets look at an example where I have $100,000 I would like to invest into an immediate annuity. I head to my local annuity store and they provide me the following table:

Depending on which age I chose the annuity, my $100K investment will pay out a guaranteed rate of 5% to 6% for rest of my life. Sounds pretty good but the key words here are “for the rest of my life” and exactly how long is that?

I’m going to be generous and use pre-covid U.S. Life expectancies of 76.61 for males and 81.65 for females. We can also look at the region with the longest life expectancy (Hong Kong) with 82.38 for males and 88.17 for females. We can now compare these to the highest payouts for each annuity age bracket.

Life Expectancy Age76.6181.6582.3888.17
Immediate Annuity at 60$83,116$108,337$111,990$140,963
Immediate Annuity at 65$66,734$95,704$99,900$133,181
Immediate Annuity at 70$39,977$70,459$74,874$109,892
Table: Anticipated Lifetime Annuity Payouts for a $100K Immediate Annuity

In most scenarios you do not even get back your base investment. Assuming you are extremely lucky and get to age 88 the largest payout is ~$141K and that amount is over 28 years which equates to a growth rate of just 1.25% per year on the initial $100K investment.

Unless there is a medical breakthrough that allows us to live well beyond the age of 100 it appears the only person that benefits from this deal is the insurance company and it shouldn’t come as a surprise. First they are a business an need to make profit, second they employ actuaries that analyze your life expectancy risk and adjust your payouts to that risk.

Recently the House of Representatives passed the Secure 2.0 act which will allow annuity offerings in 401(k) plans. One of the bill sponsors,  Richard Neal, D-Mass., spoke on the House Floor on March 29, 2022 stating the act “…is protecting Americans and their retirement accounts.” Of course the question is protecting us from whom? Not the insurance companies that’s for sure. As a note, I am not railing against the good U.S. Representative Richard Neal, for the most part I thought the act introduced some welcome changes to the 401K system (like auto-enrollment). However you can see insurance lobbying influence with the annuity aspect.

One might argue that annuities benefit those who have little financial knowledge or financial self-control. This is a pretty good argument as many of us know quite a few financially irresponsible or illiterate people but there are other alternatives. The mutual fund industry has what is referred to as managed payout funds that solves the issue of figuring out how to do drawdown and sends you a monthly check but still allows you access to your investment.

The problem with managed payout funds is they were introduced during the worst time of the financial crisis (circa 2008) and it was for a market (baby boomers) who had yet to begin retiring. As such they have not really gained traction over the years and are not offered in 401K plans. My biggest issue with these is they are modeled on old outdated portfolio allocations of bonds with some equities all based on their other mutual fund offerings. There are so many more income sources they could employ (REITS, utilities, dividend growth, or covered calls to name a few). If the mutual fund industry adjusted their portfolio mix to include some higher yielding or dividend growth components it might be the best solution today. But alas there is little to nothing out there that fits this bill so I will continue to manage my own assets to generate income as annuities are a benefit to only the insurance company.

My Final Adjustment for FI – Income Diversity

Being just 5 years out from reaching Financial Independence (FI) I have started to fine tune everything as the acquisition phase of my investing journey is coming to an end.  Losing the safety net of my steady weekly earned paycheck means I have to do more to avoid investing mistakes or unplanned events.

Recently I posted my my first fine tuning with target emergency funds I plan on having during FI as well as eliminating a rainy-day fund and instead amortizing replacement costs and adding that to my monthly budget.  A quick summary of that is as follows:

  • The Market Crash Emergency Fund – equal to 9 months of expenses
  • The Healthcare Emergency Fund – equal to 3 months of nursing home care
  • Additional $583 added to my monthly expenses – amortization of replacement costs for home, transportation, and appliances.

The final piece of fine tuning my plan revolves around achieving my income goal of passive income equal to 115% of my annual expenses while mitigating the risk of inflation, which for this exercise I will use the long term inflation average (since 1913) of 3.24%.

Jumping straight to the final solution, I determined the best mix to maximize income and reduce risk would be an allocation of 70% Dividend Growth Equities, 20% Real Estate (REITs), 5% Business Development Companies (BDCs) and 5% in Leveraged ETFs.

Fidelity Cash Management

The Fidelity Cash Management Account is one item I have not spoken about in the past.  To consolidate my financial sources, I have chosen to use Fidelity as a replacement for my bank checking account as most of my investments are already with Fidelity and this just simplifies things.   

The other aspect of the cash management account is the reference to 6 months of expenses. No this is not another emergency fund.  The intent of this balance is to smooth out my dividend income into a steady monthly cash flow amount.  As many investors are aware, dividend income is not the same month to month so again this is another simplification step.

Finally, achieving this is quite simple actually as 6 months before I hit my FI target I simply turn off all my DRIP and reinvestment activities and allow the dividends to pool.

Growth Rates & Inflation

Starting with my Dividend Growth bucket, my annual growth rate fluctuates between 4% to 5%.  This came down quite a bit as I leaned heavily into buying utility stocks in 2020 when they were on sale. While this provided stability it came at a price of muting my growth rate.

The REIT bucket can vary wildly. Some years my REITs saw a 6% rise while other years its was less than 1%. For this analysis I will stay conservative assuming an annual growth rate of 1% on the low end to 2% on the upper end. 

Regarding the BDCs bucket, this is an ebb & flow with dividend raises. Some years are 0% while others I have seen 5%. For this analysis I will stay conservative assuming an annual growth rate of 0%.

The Leveraged ETF bucket is a fairly new aspect to my portfolio and something I have been researching.  Leveraged funds such as QYLD and JEPI have become quite popular as of late in the investing world due to their high yield and monthly payouts.  Some seek the high yields while others look at total return, however, my take on them is slightly different.  One factor I have noticed amongst these funds is their monthly payout varies immensely depending on the option activity so it is understandable.  For my portfolio I prefer more consistency and predictability, as such I have narrowed my list down to just three funds that currently have the least variability in their monthly payouts:

  • NUSI (Nationwide Risk Managed Income Fund) – The average monthly payout for NUSI is $0.17 per share.  Its payout variation ranges from -10% to +10.59%.  Of all the funds I reviewed NUSI by far had the most consistent month to month payout. The only downside to NUSI is in a slow declining market it increases the costs of theirs puts & calls strategy and I do have some concerns if they can stay consistent with their payouts.
  • XYLD (Global X S&P 500 Covered Call ETF) – The average monthly payout for XYLD is $0.40 per share.  Its payout variation ranges from -16.75% to +25.25%.  XYLD surprised me being the runner-up to NUSI when it comes to a low variable payout, I thought its sister fund XRMI which uses a collar strategy to limit risk would have performed better but that varied from -23.5% to +26.5%.
  • DIVO (Amplify CWP Enhanced Dividend Income ETF) – The average monthly payout for DIVO is $0.14 per share.  Its payout variation ranges from -22.14% to +12.14% however the instances of negative months are dramatically lower than other funds.   Of all the funds DIVO has the smallest dividend at just 4.82% however (this is the best part) it has annual dividend growth! Excluding a single long term capital gain event in 2019, DIVO has increased their dividend over the last 3 years at an average rate 6.28% and makes DIVO my favorite out of the three.

Because of DIVOs growth rate, my Leveraged ETF bucket will have a projected annual growth rate of 2% that I will use for both the low and high end.

Combining all the growth grates and adjusting for weighting, my overall portfolio will see growth on the low end of 3.45% and 4.4% on the upper end. Using the long term average annual inflation rate of 3.24% my portfolio will achieve a positive real growth rate.

Low End CAGRUpper End CAGR
Portfolio CAGR3.45%4.40%
LT Inflation Rate-3.24%-3.24%
Real CAGR0.21%1.16%

As you can see in the table above, a 0.21% real CAGR does not leave much left on the table but it is positive none the less. Considering the amount of money I will be investing over the next 5 years, this was the best combination I could use that would allow me to achieve FI. If I reduce the allocation to dividend growth stocks I would, in the short term, exceed my income need but after inflation is factored in I would have a negative CAGR and longer term that benefit would quickly erode.

Now my entire FI plan for next 5 years has been laid out, my only task left is working towards the final solutions. Of course no one is perfect, I have tried to account for as many scenarios as possible that could occur during my FI years but I may have missed something and I am always open to any input or a glaring omission I might have missed.

Buys and Sells for the Week 4/8

Not a lot of excitement (positive or negative) for the week. The Fed released some new commentary about more rate increases but nothing that caused the stock market to panic as most investors are expecting additional rate hikes.

Only weakness was in transports and not sure why. If I had to guess maybe there is some worry of the economy slowing down (i.e. recession talk). Other than that it was a pretty quiet week so here are my trades for the week:

  1. Snap-On Inc. (SNA) – increased position – It dips and I buy. Grabbed 1 share @ $204.37 and a 2.78% yield.
  2. Best Buy Co. Inc. (BBY) – increased position – Love it when a stock I like is just floating near their lows as I can slowly build up a position. Grabbed 2 shares @ $90.39 and a 3.87% yield.

Reimagining my Emergency Fund in Retirement

(note: this is part 2 to the previous post “Cost of Getting Old”)

Up to this point of my career, my emergency fund had one simple focus; to mitigate the risk of income loss.  I kept 2 months’ worth of expenses in cash and the rest I poured into the stock market in the hopes that a combination of unemployment benefits, severance pay, emergency cash, and dividend income I could cover 6 months of expenses until I found a new job.

However, this changed after I turned 50 and retirement was suddenly in view.  I am not naïve to believe ageism or age discrimination does not exist.   I knew going forward if I lose income from my job the odds of bouncing back and finding new employment were stacked against me.  At this point, prior to collecting social security, my only source of income would come from dividends so I would need to mitigate for a market crash and high inflation.  My current emergency fund was not setup for this and needed to be reevaluated.

I analyzed my portfolio against different market conditions for crashes and time periods for inflation.  In a quick summary, I discovered my portfolio could suffer a 30% cut in income and it could take up to 4 years to recover. At the end of the day, for my portfolio to weather that period I determined I would need the equivalent of 9 months of expenses in cash and developed a plan on how to fund it.  Of course life is not just about stock market performance, there are also unplanned expenses like a new roof or furnace so I decided that I would also need a $10K rainy-day fund for these instances. This was cash I already on hand so I dismissed thinking about it any further.  But this rainy-day fund is where I was wrong.

In determining my rainy-day fund, I was lazy and gave it little thought and I did not realize it until my recent experience with my father-in-law going into a nursing home leaving his children to make life altering financial and life decisions on his behalf. It was at this point I realized s $10K rainy-day fund was not even close to handle a situation like this.  At a minimum I needed at least $45K (3 months of nursing home expenses).  While I had concerns of how to fund this, I was more worried about the doubt creeping in if I was planning correctly.

As I was pondering my predicament I came across a video episode of Two Sides of FI where one of the vloggers (Jason) mentioned that for major repairs he amortizes the cost into his monthly expenses.  His statement was like a concrete block being dropped on my head!  With all my years looking at financial statements its not like I did not know what depreciation cycles were. I felt like a complete idiot for not viewing it this way.  I need to reanalyze this and its not that hard. 

Most of the major purchases we make have a defined or expected life before they need to be replaced and there is no reason to treat emergency care in the same fashion and amortize that cost assuming I will need the funds around age 75.  Taking all of this into account here is the additional monthly expenses I need to account for:

ItemUseful Life (Yrs.)Remaining Life (Yrs.)Replacement CostMonthly amortized cost
Furnace or HVAC2019$8,000$35
Hot Water Tank1210$800$7
Washer and Dryer116$1,600$22
Electric Stove1310$800$7
Emergency Care22$45,000$170
Sub-Total Monthly Expense$621
Minus Existing Cash-$10,000-$38
Total Monthly Expense$583

There we have it, an additional $583 in monthly expenses or approximately $7K a year. Now I will need to revisit what my planned expenses were in retirement and add these figures. In theory it should increase my targeted dividend income I need for retirement. Though not good news I think it is better to find this out now rather than later and plan accordingly.

There is a quote from Alan Lakein that inspires me at times like this:

Planning is bringing the future into the present so that you can do something about it today

In other words I have the means to do something about it today while I will not have the means to fix it in the future,

Cost of Getting Old

(note: this is part 1 of a two part post)

In early December my wife had that dreaded middle of night phone call from her 89-year-old father.   He fell in the night and couldn’t move and called in pain.  My wife immediately called 911 and rushed to his house to meet the paramedics to bring him to the hospital. 

The hospital still had COVID protocols that had limited access in place which meant I couldn’t meet my wife there and she would have to go this alone.   After several days the hospital diagnosed him with having a broken bone in his neck and would require a neurosurgeon to advise for treatment.  With no neurosurgeon available the hospital discharged her father to a nursing home.  Shortly after being transferred to the nursing home, my wife discovered the entire neurosurgeon practice was closed and would not return until January.  This meant at a minimum he would be at the nursing home for 2 months.   

After 2 weeks in the nursing home my wife received a letter from Medicare that they would no longer pay for the cost and care in the nursing home. My wife and her two sisters were suddenly in panic mode and I could tell it was affecting their decision making.  In the area we live nursing home costs on average run $15,000 per month.  Thankfully my wife was levelheaded enough to explain that until they receive the neurosurgeon examination there was little that they could do (or change).  My father-in-law had enough cash on hand to handle costs for a couple of months and the decision was postponed. 

After the diagnosis from the neurosurgeon it was determined the break was inoperable.  He would be in a cervical collar for the remainder of his life and will also have difficulty walking on his own or feeding himself in addition to his other frailties he had before the accident.  It is now a level of care that is beyond our capabilities and long term care is his only option.  At this point we have used the last of the cash and are now filling out the paperwork for Medicaid assistance (Title 19).  My wife has been a caregiver to her parents for so long I can see this decision really hurt her emotionally.  I can tell at times she feels that she has failed her father by not being able to care for him herself.  I try not advise in times like this and try to just be there for her and provide a shoulder to lean on or lend an ear to listen. There is nothing easy about this, it is part of life, we just have to endure and be there for one another.

Throughout this time I kept placing myself in my father-in-law’s shoes and asked what could I have done that could have avoided some of this or made decision making much easier for my children? 

My knee jerk reaction was to get long term insurance.  It has been the generic advice that you can find in every finance article or recommended by most financial advisors as far back as I could remember.  But as I researched long term care insurance, I discovered it not as beneficial as I had thought.

 First let us begin with premiums.  Most articles I found quoted premiums for someone my age at $3500/year (sounds reasonable) however, I discovered these quotes were from 4 to 5 years ago and the landscape has drastically changed.  As the age 65 and above group rapidly expands with the baby boomers, many insurance companies are opting out of offering long term care insurance because of rising costs.  The few insurance companies that remained have since doubled the annual premiums which are closer to $7,000 annually and if you have any pre-existing health condition they can deny you coverage.  Of course, COVID has not made things easier and there is now speculation that premiums may increase to $11,000 annually.

The second big discovery I made was when and how much in claims are paid out.  Insurance companies do not pay out the first 90 days of nursing home care, this is for a good reason.  A large percentage of people admitted into a nursing home die within the first 90 days.  Remember insurance companies have actuaries who predict this, the policy is geared toward their benefit not yours.  Assuming you make it past the first 90 days and the policy kicks in, there is a cap of how much can be claimed and that typically falls in the $270K-$300K range.  Going back to my area where nursing home prices are $15K/month that would equate to just 18 months of coverage.

What I thought was a simple slam dunk answer has suddenly become more complicated.  Given the health care costs in my area as well as the fact that my wife would be denied for a pre-existing illness leaving just myself, long term insurance doesn’t seem to be the answer.  Assuming I would sell my house if this ever happened to me, the funds from that plus my portfolio should be able to easily cover long term costs.  Only concern is what to do until then as I would need some cash on hand until assets can be liquidated allowing my children to make stress free decision making.  To do this I really need to re-think about my emergency fund.

(part 2: Reimagining my Emergency Fund in Retirement)

Buys and Sells for the Week 2/4

Interesting week with so many companies reporting but I’ll start with AT&T (T) finally telling us what the reduced dividend will be, I was planning on $1.20/share but they came out at $1.11/share which was slightly below what I had hoped for but still tolerable. At least the guessing game is over and we can move on

Now onto the good news, I received the most dividend raises ever in 1 week by racking up 9 raises; Allete Inc. (ALE) 3.17%, Air Products (APD) 8%, Avista Corp. (AVA) 4.14%, BCE Inc. (BCE) 5.1%, Brookfield Renewable Partners both BEP & BEPC 5.33%, Camden Property Trust (CPT) 13.25%, Prudential Financial (PRU) 4.35%, and United Parcel Service (UPS) 49%.

Here are my trades for the week:

  1. PPL Corp (PPL) – sold position – Sold the entire position. Played this out for the dividend as long as I could and they probably have 1 maybe 2 more payouts before they cut the dividend. My guess is a 35% to 40% haircut so I sold out at $29.84/share. This is a sizeable payout (I had just over 1000 shares) , and instead of reporting out the buys on my weekly post I am taking the lazy way out and letting you know now I am redistributing the funds into Pinnacle West (PNW) Algonquin (AQN), and BCE Corp (BCE).
  2. Oil-Dri Corp of America (ODC) – increased position – Forgot I had a limit order on this and the price dropped on Friday to trigger the buy . Grabbed 4 shares @ $32.07 and a 3.37% yield.

2021 Annual Dividend Income Summary

The best way to classify my portfolio for 2021 was a year of recovery and unexpected dividend growth.  This wasn’t limited to just my portfolio as every fellow dividend growth blogger reported larger than expected dividend growth.  It was amazing how many companies increased their dividends at a rate much greater than we anticipated or restored their dividend payouts.  And it wasn’t just dividends that grew, my portfolio over at Fidelity grew 25.8%.  My Fidelity account performed much better than my M1 finance account but still under performed the S&P 500 and SCHD but on par with VYM.

I knew coming into 2021 it was going to be a decent year as I freed up cash in 2020 and went on a stock buying tear from June to October.  In 2020 I made $35,836 and predicted 2021 to come in circa $40K and with dividend raises maybe $42K. Actual dividend raises were coming in well above forecasts and the only stock that disappointed me last year was UPS with its paltry 1% raise.  When all was said and done, I received a total of $44,821.11, a 25% increase from 2020!

For 2022 I expect my growth rate to be more muted and to be closer to my targeted 12.5% growth rate.  Unlike 2020, I did not add a lot of new capital outside of my weekly M1 Finance & Roth IRA contributions so 2022 will be reliant on dividend reinvestment and raises.  The best news I received last year was that with the massive growth in income it shorted my FI date by an entire year and I am now down to just 5 years & 10 months to FI.

My 12 month forward annual dividend is a little hard to forecast as I need to adjust for some companies that will be cutting their dividend payout in 2022 (I’m talking about you AT&T).  Adjusting for the cut I’m currently sitting at $45.8K. Using this figure I updated my comparison to median household income in the U.S and the results improved quite a bit from 2020 as I now meet at least 80% of median household income in 18 states (+13 states).   Too bad that I live in one of those expensive red states lol.

Now that 2021 is behind us we can focus on 2022.  Not sure what I will be buying going into 2022 but it should be interesting where the economy goes considering inflation, rising interest rates, supply chain woes and tight labor markets.  One thing I am confident in predicting is that not just myself but all the DG community we are opportunistic and will jump into a stock the moment a value buy presents itself.