≡ Menu

‘Buying Income’ With Stock Dividends – Good Travel Money Strategy?

Home Travel Money Boards Passive Income ‘Buying Income’ With Stock Dividends – Good Travel Money Strategy?

Viewing 15 posts - 1 through 15 (of 17 total)
  • Author
    Posts
  • #32662
    VBJ
    Keymaster

    I’ve started “buying income” by investing in dividend paying stocks. Basically, you buy stocks with good dividend payouts, sit back, and get paid. It is probably the purest form of passive income — as long as you hold they stocks you will get payments … just so the company doesn’t go under or decide to stop paying dividends. The best part here is that at the end of the day you still maintain your equity in the stocks on top of all the dividend payouts, so if you ever wanted to cash out you can.

    If I can get my portfolio up to paying 30 grand per year in dividends, then I will be getting enough money to travel the world perpetually. Although this will probably take at least a $300,000 investment.

    That said, this is a long-term financial strategy. Passive income, in general, is a long-term endeavor that usually has low payouts in the early years. It’s not meant to be something to actively depend on right away, but something to fall back on if needed or to eventually build up so that you can live off of it.

    • This topic was modified 8 months, 1 week ago by VBJ.
    • This topic was modified 8 months ago by VBJ.
    • This topic was modified 8 months ago by VBJ.
    #32739
    VBJ
    Keymaster

    I started testing out this strategy. I’m up to $576 of annual “bought income.” It’s kind of addictive. Each morning I get on and buy a few well-selected dividend paying stocks. Each time I go out to eat or get a beer at a bar I think, “Man, I could have bought a stock with what I paid for that which would pay me a little cash quarterly for years.” It’s kind of like building a mountain out of handfuls of dirt.

    #32788
    VBJ
    Keymaster

    I began “buying income” last week and I’ve made my way up to $1,396.22 in estimated dividend payments per year.

    When we consider that I only made $37,267 last year (which was actually my best year yet) then the returns on this investment are relatively significant. I essentially just gave myself a 3.7% annual raise.

    The money that you should be using for this is money that you’d ordinarily keep in a savings account. This isn’t really for money that you need to buy things that you need day to day. If you keep that money in a bank you will get like … almost nothing in interest payments. But if you buy the right dividend paying stocks you can make between 8-12% off your investment each year, and if you reinvest those payments the interest compounds indefinitely.

    • This reply was modified 8 months ago by VBJ.
    • This reply was modified 8 months ago by VBJ.
    #32801
    VBJ
    Keymaster

    I’m a traveler. I can live well on $20 a day in most of the world. $1,396.22 is two months of travel for me. I never before realized that I could make this amount of money each year doing nothing … and each workday I will add a little more and a little more to it. My goal by the end of the year is to build this up to $2,000 … and by the end of next year $5,000. Then I’ll be playing for real.

    Imagine getting paid $5,000 per year for doing nothing?

    • This reply was modified 8 months ago by VBJ.
    #32822
    VBJ
    Keymaster

    Dividend income 2
    I bought an additional $86.50 of yearly income this morning. I’m now up to $1,482.72 on the year. I’m going to try to get this up to $2,000 before the year is out. I’m reinvesting the dividends on most of my positions.

    I have one that I’m planning on selling once the price rises but the rest I’m in on for the long haul, as that’s how the money is made: sitting back and watching the investment compound upon itself. I’m not yet to a point where taking the money out would be that beneficial. It would be better to wait until the mole hill becomes a mountain that I can fully live and travel off of.

    Right now, with the pandemic adversely impacting certain industries, a lot of good dividend paying stocks are on sale. I have three in energy, three in real estate, one in agriculture, one financial, and another in telecommunications. I imagine the value of many of these stocks will shoot up after the pandemic fades away, but that’s not really the game here: the value of any given position on any given day isn’t really that pertinent. I’m not looking to sell. I buy when the prices are low and hold, hold, hold.

    • This reply was modified 8 months ago by VBJ.
    #32876
    VBJ
    Keymaster

    The best part about going for dividends is that you don’t really have to care to much about fluctuating stock prices — within reason. Yesterday, my portfolio was down big time. This morning, it’s booming. However, I only have two positions that I’m planning on getting out of when the price is right; for the rest, I’m in it for the long haul, so a screen full of red numbers is no reason for panic. If I wasn’t making small acquisitions daily I wouldn’t have to even check my positions. This is a low intensity form of investing — it’s basically a savings account that pays out 10 to 12% each year and compounds that interest.

    And anyway, you don’t really ever make or loose anything on a stock until you sell.

    My main strategy up to hear was to buy up stocks from proven companies that are proven to pay regular dividends whose prices are on sale due to the pandemic.

    #32896
    VBJ
    Keymaster

    At the end of last week I was up to $1,628.96 in annual dividend earnings. We’re getting there.

    Dividend earnings

    #32928
    VBJ
    Keymaster

    Exxon-Mobile (XOM) is currently on sale, trading at $39.46 per share. This is one of the classic dividend paying stocks, with every increasing yearly dividends for decades, and it’s going for $30-$40 under its usual rate. At the price that it’s going for now, it’s dividend yield is 8.24% ($3.48). Which means you get 8.70% of what you pay for it back every year. On top of that, the price of the stock is depressed because of the pandemic and the fact that it was just dropped from the S&P 500 Industrials Index, which doesn’t mean much according to economic fundamentals, but does have an impact on how the value of the stock is perceived.

    If you’re betting that the world is going to get back to some semblance of normal soon then XOM should also shoot up in price. This doesn’t matter too much for the “buying income” strategy, but it does feel a lot better with the numbers in your stock portfolio are green rather than red.

    As for the “buying income” strategy, you can essentially get a good dividend payday at half the price.

    XOM stock price

    #32937
    VBJ
    Keymaster

    Today closes another week of trading. This is what I bought this week:

    XOM, GAIN, ET, LMND, KODK, SHLX, HEP, NYMT, T, PBA, DHT, PBCT, SPR, MAIN

    Some of these stocks I’m aiming to swing trade. Others I’m looking to hold onto for the dividend income.

    My focus has mainly been on usually solid industries that have been hit by the pandemic. I believe the world is fast on the way to recovery and that these stocks are essentially on sale. So I bought up a bunch of energy, tanker, and real estate stocks. I bought some Kodak just because I was in Rochester — nostalgic reasons, perhaps (or because the company operates the largest business park in America and they are eventually going to find something to do something with it).

    The tanker stocks are a bit risky — they got hit hard and they aim to pay super high dividends. I’m not really expecting DHT to pay out a 30% dividend next week. However, they were so undervalued that it was hard not to try them … and if they actually pay those dividends that would be a nice payday. Whatever the case, “buying income” is about putting money into stocks for the mid to long term, and I imagine most of these companies will recover once the world opens up again.

    I crossed a milestone this week. I originally aimed to build up to $2,000 in annual dividend payments by the end of the year, but I crossed this threshold yesterday. I’m now up to $2,285.62 over the course of a year, or $190 per month. This is money that I get paid for doing nothing. I’m now raising my goal to $3,000 by the end of the year.

    #33202
    VBJ
    Keymaster

    DHT paid.

    This stock pays $1.92 per share in dividends annually, divided up into quarterly payments. What’s most intriguing here is that the stock is currently going for $5-$6 per share. This means the dividend yield is in the ballpark of 30+%, meaning that the company is paying out a third of the share price back to investors every year. This is unsustainable, and stocks like this are generally dubbed dividend yield traps, as the company promotes high yields to lure in investors but are then unable to pay them.

    An important thing to note about dividend investing is that companies are not obliged to pay out the dividend rates that they announce. So they can say, “We’re paying X amount” but then pay Y amount or nothing at all. Now, when this happens it’s kind of like the company is shooting themselves in foot as investors will loose trust in them (and a company’s past dividend payouts are readily available) so I don’t believe many will intentionally try this as a strategy, but it does happen in the event of economic downturns, lower than expected earnings, etc.

    So I took a bit of a risk on DHT. However, it was a calculated risk. I looked at their earnings and asked if they had the money available, and it seemed as if they did so I bought a few hundred shares over the past couple of weeks.

    I will probably buy some more this week. However, I’m going to closely monitor the investment. It’s not like investing in Exxon-Mobile, who has been paying an ever-increasing dividend for decades.

    #33310
    VBJ
    Keymaster

    It felt oddly good getting that $116 from $DHT yesterday. This was money that I essentially did nothing for. I took some capital, pushed a few buttons, and moved in from here into there. $116 is an entire day of work for someone getting paid $15/hr. I got paid that money while doing another job that paid $100, while writing a blog post that will make little morsels of cash throughout the years. $116 for doing nothing. Not bad.

    Now if I only started building dividends when I first started traveling 20 years ago …

    What did I do with that $116?

    I immediately reinvested it by buying more dividend paying stocks. I felt it was a good show of faith that $DHT is paying out their ridiculously high dividend, so I used the money that I got from them and bought 20 more shares ($38.40 per year in dividend payouts) and put the rest towards a building a larger position in $XOM.

    Reinvesting dividend payments back into dividend paying stocks is essential to being able to build this portfolio large enough to travel off of. I want dividends to compound on top of dividends.

    However, I don’t engage in these DRIP programs, which automatically reinvest dividend payments into the stocks that pay them. Why? Because not every dividend paying stock is a good buy at all times. I’d much rather take that money and reinvest it where I want to.

    My strategy behind buying dividend stocks is to get them while they are on a downswing in price. When I’m looking to buy income I scan through my dividend paying positions and search for those whose prices are at a lower point (today: $XOM, $SPG, etc) and buy them up. Then when the price rises I will essentially be able to say that I purchased the dividends at a reduced fare.

    The caveat here is that companies do go out business …

    And struggling companies will sometimes reduce or cut their dividends.

    So this has to be done strategically. What I look for first is the dividend aristocrats — the 60 or so S&P companies that have been increasing their dividends annually for at least the past 25 years. Next I look for otherwise solid companies whose prices have descended due to temporary issues that are out of their control. Putting money into stocks when they are at a low point is always a gamble … but this gamble allows me to make 50% – 200%+ more off of my dividend investments.

    Another thing to note is that a company lowering their dividends isn’t always a stop sign. If the decrease in dividend payments is in proportion to the decrease in the stock’s value then I still often find this to be a good deal, as there is a good chance that the stock’s price is going to go back up and the company will again increase it’s dividend.

    For example, in January $SPG was trading in the ballpark of $145 per share and they were paying an $8.40 annual dividend. Today, $SPG is trading for around $68 and the dividend was decreased to $5.20 annually. Sure, that’s $3.20 per year less, but the cost of the stock is more than 50% less, so it’s a proportionate decrease so still a good value. Plus, there’s a reasonable chance that as soon as this pandemic stuff is over the price of the stock — and it’s dividend ($SPG is a REIT and has to pay out 90% of its earnings to shareholders) — are also going to shoot up, and I will be able to enjoy a position on a high dividend paying stock for a discounted price.

    #33320
    VBJ
    Keymaster

    The market seems to be responding to DHT. Up 2.56% 15 minutes after the market opened.

    #33526
    VBJ
    Keymaster

    Today closes another week of trading. I built up dividend positions in XOM, DHT, ET, HEP, FRO, and GAIN. My total estimated annual dividend income is up to $2,709. That’s $226 a month indefinitely … for doing nothing. $2,709 is more than what I pay for one month’s rent. It’s enough cash for two to five months of travel, depending on region. It’s also $422 more than it was at this time last week.

    Slowly, that passive income from dividend payments is building. I’m trying to build it up to $30,000 a year. Then I can have a little more fiscal space as I engage in my media projects.

    #33711
    VBJ
    Keymaster

    I’m now up to $3,055.99 in estimated yearly dividend payouts. Three thousand bucks that I will be paid for essentially doing nothing. That’s $254 per month, $8.37 per day. Dividend payments are perhaps the purest form of passive income.

    This is kind of a benchmark week for me, as my goal with this strategy is to build up $30,000 per year in dividend payments. Once I do this then I’m good to go — retire, never have to take work that’s just for the money, do whatever I want. I want to be able to wake up in the morning and say to myself, “No matter what I do today I’m making a hundred bucks.”

    #33823
    VBJ
    Keymaster

    I’ve continued injecting money into dividend stocks — taking active income and turning it into passive income. As of now, I’m up to $4,532.59 in annual estimated dividend revenue. That’s $377 per month, $12 per day.

    $12 per day is a benchmark. I used to completely travel off of $12 per day. Granted, this was between 2000 and 2003 and I was mostly moving through South America. But it is a benchmark nonetheless.

    $12 per day more than covers my miscellaneous expenses: cups of coffee that I buy (but don’t really drink) just so I can sit at cafes and work, occasional bottles of sunny afternoon beer … If I was in Latin America or Southeast Asia, $12 per day would at least cover the cost of accommodation.

    Of course, I’m not spending any of these earnings. I reinvest them all as I’m still in the process of building up my dividend mountain … and passive income should ideally be allocated back into producing more passive income until you get to a point where you can comfortably live off of it.

    Over the past couple of weeks I’ve been focused on investing in three sectors in particular: energy, real estate, and finance. Why? I’m a contrarian trader. These sectors have been massacred by the Covid pandemic and I believe they have a wide range to roam when they make their comeback, which I’m planning on happening soon. However, as far as dividend investment is concerned, the up and down movement of stocks isn’t really that much of a concern. Just so the companies keep paying their dividends, a low priced stock is on sale and will allow you to capture a much higher yield. The risk is if they cut their dividends … but I believe what can be gained here (10% to 20% yields) is worth the risk.

    These are the stocks I’ve been investing in:

    $ABR
    $BPY
    $CIM
    $CSCO
    $DHT
    $EPD
    $ET
    $GAIN
    $GLAD
    $GOOD
    $HEP
    $MAIN
    $MO
    $NYMT
    $OHI
    $PBA
    $PBCT
    $PSEC
    $PSXP
    $SHLX
    $SPG
    $STWD
    $T
    $TOT
    $XLE
    $XOM

    Mostly energy, real estate, and finance. A little tech. A little telecom. Some of these positions are dividend aristocrats — stocks which have been paying out consistent or rising dividends for decades, so are relatively safe. Some are a little aggressive, but the pot odds lean towards getting long.

Viewing 15 posts - 1 through 15 (of 17 total)
  • You must be logged in to reply to this topic.