Wednesday, May 26, 2010

A Great Dividend Portfolio for the Long Term

I have been researching stocks that would be great for dividend income. This would play into my eventual to be able to live off the dividends the stocks would provide, while still enjoying equity growth. Imagine, if you will, being in a position to be able to get $100,000 a year on income from the stocks in you portfolio.

If you want to do that today, you would need a $4,000,000 paying a 2.5% yield at the time of purchase. A more attainable option would be to build up a portfolio of stocks that not only pay dividends, but increase them on a yearly basis. If you were to reinvest the dividends back into the stocks, that 2.5% average yield could be more than 15% on your initial investment 20 years from now.

For example, in 1990 McDonald's paid a 3.49% yield. On that same initial investment, you would get a 25.6% yield today. In terms of dollars, in 1990 you would have received a $8.75 for every $1000 invest back then. Today, you would get $64 every quarter. That is just amazing and does not take in to fact that you would have more than the initial shares you purchased with that initial $1000. If those dividends were reinvested, then you would see over $300 per quarter.

With that in mind, I ran into a great list of dividend stocks for over at Dividend Growth Investor. Over there you will find great dividend growers such as Altria, McDonald's, Clorox and Con Ed.

Tuesday, May 25, 2010

A Different, Yet Ultimate Dream

I have mentioned in the past that our younger daughter has medical issues which has been making it tough for my wife to find some part time work. The little one has an odd school schedule (1/2 day) as well as a slew of therapy sessions during the week. On top of this, she has more than the normal doctor's appointments, some of which are out of state.

Another problem with the little one is that she only eats well with yours truly. Mom has a tough time feeding her and more calories are wasted than taken in. My work has been accommodating, but that can only last so long. By not being in the office as much as before, I lose that face time with my fellow coworkers. Even though I put in my best, the perception is that I am not putting in as much as I can. This is normal office politics.

This has lead me to think about what my long term goals are and where my priorities should be. Ultimately, I would love to be able to spend as much time as I can taking care of our younger daughter. The more we can work with her now, the better for her long term development.

So, my dream would be to free myself of the 9-5 work day. I think that by paying off our debts and earning passive income would be the best way to achieve that goal. Passive income would be in the form or website earnings and writing for sites such as Associated Content, as well as investment income. I would be ideal to gather enough dividend paying equities to be able to live off the payments.
Now I have to work towards that goal. I have setup my get out of debt plan already, but need to see if I can advance that somehow and in the meantime, build up my equity portfolio. Good luck to me!!

Monday, May 24, 2010

Secrets of Self-Made Millionaires

I found this Readers Digest article via Yahoo on the 5 Secrets of Self-Made Millionaires. It was quite an interesting read. Here is the breakdown of the 5 and my look at them.

1. Set your sights on where you’re going
So true. If you don't have a vision, then how will you know where you end up.
2. Educate yourself
Whether you want to be a finance guru or scientist, you will want to study, study, study.
3. Passion pays off
You have to love what you do, otherwise, you will not succeed.
4. Grow your money
Reinvest what you earn back into your business. Don't squander your earning frivolously.
5. No guts, no glory
Just like exercising, "no pain, no gain." You have to take a risk and sometimes it may seem tough, but you have to continue.

Wednesday, May 19, 2010

One Million Not Enough Anymore?

I just read an interesting article over at The Motley Fool. The premise is that $1,000,000 is enough for retirement if your are doing it today, but what will it bring 10, 20 30 years from now.

"But if your retirement remains several decades distant, you'll need to remember that inflation will eat away at your purchasing power. At 3% inflation each year, in 30 years that $40,000 you withdraw will buy as much as a mere $16,000 does now. Ouch.

So how much would you need to retire at age 65 with the equivalent of today's $1 million? Check out this handy chart:

Current Age

You'll Need This at Retirement


$3.26 million


$2.81 million


$2.43 million


$2.09 million


$1.81 million


$1.56 million


$1.34 million


$1.16 million"

According to this chart, we will need over $2 million saved up by the time we hit retirement. Currently we are on track to have $550,000 in retirement funds when we hit 50 years old, leaving us with 15 year to reach the the new goal. Yikes!

Tuesday, May 18, 2010

2010 Financial Goals

It being late in the first half of the year, I thought I would throw out some goals for the end of the 2010. This is all incumbent of my wife being able to find some part time work. If she doesn't soon, we are going to have to tap into the emergency fund even more and then lord knows what. I have been contemplating finding a second job, but my work sometimes requires weekend builds, so it would be tough to schedule. Lets hope we find something soon.

  1. Emergency Fund: $5,000.00 (currently at $6200 and being taped into)
  2. Taxable Investments: $2,630.00 (currently $1758.87)
  3. Retirement Accts: $99,540.00 (currently $90980.79)
  4. Credit Card Debt: $10,393.00 (currently $12793.42)
As I stated, if my wife does not find work soon, the emergency fund will really be dwindling, but I guess that is why we have it. I have started selling stuff on Craigslist and Gazelle, but that is going slowly.

Friday, May 14, 2010

Stock Purchase #2

Today I picked up Altria (MO) as my second stock in my taxable account. I grabbed 22 shares for a whopping total of $483. I have owned MO in the past and done really well with it, especially when they spun off craft and then Philip Morris International. The stock pays a dividend of over 6% currently and does increase it every year, so I should see decent income over the next few years.

Combined with my prior purchase of Fifth Street Finance Corporation (FSC), I should be getting around $79 a year on my initial $990 dollar investment. This is much better than if I left it in a savings account since I don't plan on touching the money for years. I will also look forward to being able to add to the account when our finances are more stable.

Thursday, May 13, 2010

A Giant Step Backwards

I knew this was going to happen, but decided to take the hit all at once. Today, I paid off to large bills to the city. One is a sewer assessment annual payment, and the other is our regular sewer bill. Combined, the total comes to $1189, which has to come out of our emergency savings.

The sewer usage bill could have been split into two payments, but I wanted to get it over with. Out of sight, out of mind. Hopefully we can make this up over the summer somehow. I might have to switch some things out, like the extra cash I was going to put towards our credit card bill. Also, we have no auto insurance payments over June/July as well as a couple of dividend checks from our insurance company.

Wednesday, May 12, 2010

Decided on my Scottrade Account

Yesterday I was pondering what to do with my taxable brokerage account. Well, today I made my decision and pickup up a stock as well. So that means I decided to keep the money in the account. My next choice was to go for a growth stock or some income. I decided on the latter.

I did some research last night on high dividend paying stocks and settled on Fifth Street Financial Corporation. They are kind of a private small business administration, providing loans to companies looking for some capital injection. This type of business was set up through government legislation back in the 1980s. FCS has excelled at these loans in the past decade. This is because they have a strong capital base as opposed to other companies who rely on loans from the big banks to fund their own capital. FCS also uses loans from the banks, but because they have their own capital, they are less risky.

The good thing about these corporations is that they have to payout 90% of their net earning back to their shareholders. In the case of FCS, they pay rather well. The stock is currently trading at about $13 per share and the quarterly dividend is $.32. This means their yield is 10%. As long as the economy continues to pickup, I see the company and it's group doing well. We should see more startups now and existing small businesses will be looking to expand. With that in mind, I decided to pickup 38 shares at $13.07. This should pay me around $48 a year, if the free cash flow is maintained.

After going back and forth, I decided to split the $1000 in the account into 2 dividend stocks. I have not decided on the other one yet, but am leaning towards a big guy, like McDonalds or JnJ. This will be me one dividend grower to match with FCS.

Tuesday, May 11, 2010

What to do with Taxable investment Account

I have had a Scottrade account for a few years now. It was funded with a $1000 and after a couple of holdings, has now $1003 in cash. Actually, it is earning a grand $.04 month right now. I was thinking of closing it down and adding that money to my emergency holding or putting it towards my debt snowball. But, part of me wants to keep the money there. I am really torn on what to do. I do like the idea of seeing if I could grow that money.

Here are some options of what I can do with the money:
  1. Cash it and put it in towards a credit card that is at 4.99%
  2. Cash it and add it to our emergency fund earning .50%
  3. Keep it at Scottrade and put it in a dividend paying stock such as JNJ or ADP which will get me nearly 4%.
  4. Keep it and try to search for a good growth stock. I actually did well in my last holding at Apple and made some good money after seeing the account dip down to about $500.
I am leaning towards the dividend stock at the moment, since it will be a safe play and It will be earning money better than in the emergency fund. Decisions, decisions.

Monday, May 10, 2010

Big Day Today

Last week, I stated that I would put $1000 towards our one of our outstanding credit cards which is at 4.99%. Well, today I did just that, knocking the balance down to around $5806. I did not stop there though.

As I was looking at our other outstanding credit card, which is at 1.99%, I decided to check out my rewards balance. I was elated to find I had enough to throw $25 at that balance. It is now down to $6925!! That brings the total of both down to $12781. Boy that that feel good. Now, I wish that I could throw this type of money at the balance every month, but this was a great opportunity.

I won't have this chance to bring the debt down for a while, as we have some summer projects lined up. We need to finish reseeding our lawn and also need to retile the bathroom and put in some new fixtures. While these are some big expenses (probably around $500 total), they are sorely needed. We want to make sure the house is sellable if the opportunity arises.

Monday, May 3, 2010

The Debt Reduction Journey Begins

Today, I decided to kick start my ambitious debt reduction journey. I am using the Debt Snowball method that David Ramsey has made famous. Basically, he said to list your debts from the smallest amount to the largest, and start paying them off in that order. I idea is that tackling the little ones first gives you a psychological boost. The faster they are eradicated, the more you stick with the plan.

So that $7000 credit card debt @ 4.99% is going to get hit first. Actually I have 2 payments this month going in. Today, I paid $275 and next Monday will see another $1000 go in. Where did that extra dollars come from? My older daughter goes to a private school (we do get some financial aid here) and we pay on monthly installments. It is automatically deducted from a separate bank account that gets money directly from my paycheck. Well, the payment for this year are done, and we had $1100 left over. I decided to put that money towards the credit card debt.

Actually, since we don't pay over the summer as well, I hope to put another $800 towards the debt in August. That should leave the first debt in our snowball down to $4250 before September, if all goes as planned. By August of next year, the first debt in out Debt Snowball will be payed off as planned.