In 2012, I retired from my engineering career and our household income dropped by 65%. Oh! Most families can’t handle that kind of discount, but I was prepared. We already lived frugally and I increased our passive income. I invested in dividend stocks, rentals, and worked some side hustles. I’ve been lucky that everything has gone very well over the past 12 years. Our fire income has grown to exceed our expenses.
It’s been a few years since I’ve shared our taxable account. Today, I’d like to provide an update on our dividend portfolio.
Dividend income is my favorite form of income because it is very passive. I don’t have to do much and the profits will continue to flow And grow. I loved rental properties, but they were a lot of work. These days, I don’t have time to be a landlord anymore. That’s why I invest in real estate crowdfunding. I can benefit from a real estate investment, but I don’t have to fix the toilet. The only problem with real estate crowdfunding is filing taxes. Some sponsors are chronically late on K1 forms and I have to file a tax extension every year. It’s annoying, but not a deal breaker. The pandemic and high interest rates have also caused problems for many sponsors. Some projects did not perform well as expected. Anyway, let’s get back to the dividend portfolio.
Dividend portfolio development
Before I retired, our taxable account was invested in index funds and growth stocks. When I retired, I wanted to grow our passive income, so I focused more on dividend growth stocks. These companies are constantly increasing their profits. At that point, I assumed Ms. RB40 would want to retire in a few years.
We set a tentative retirement target date of 2020. However, it didn’t work out as I imagined it would. Ms. RB40 is one of those people who wants to be productive and contribute to society. She could retire if she wanted to, but she prefers to work. After I understood her point, I stopped investing in dividend stocks. Dividend income is nice, but you have to pay taxes every year. That’s why I’ve been back into growth stocks over the past few years. Fortunately, they’ve been doing a very good job lately.
Dividend income
Below is a graph of our dividend income since 2012.
It has grown steadily since 2012 and topped out in 2019. If I continued my focus on earnings, it would likely be much higher today. I feel jealous every time I read it Bob’s earnings report. Their portfolio generates over $4,500 a month! This is amazing. But we did just fine too.
Portfolio growth
This is the value of our dividend portfolio.
I’ve been lucky over the past few years and our portfolio has grown quite a bit. Since 2019, I haven’t added much money to this portfolio because I wanted to increase our passive income through real estate crowdfunding. That worked well too. You can see RE crowdfunding performance here.
Individual stocks
Here is the spreadsheet.
For 2024, the total return is 1.81%. This is very low for a dividend portfolio.
Performance looks better than it actually is. I’ve gotten rid of some losers over the years due to tax cuts. Anyway, let’s take a look at some of the highlights.
Best Profit Percentage – Eli Lilly
I bought LLY in 2011. It was my first dividend stock. Since then, LLY stock has risen by 2,044%! They’ve had some setbacks this year, but LLY is still our best dividend investment. Recently, the total dividend received ($3,683) exceeded the price we paid for the stock ($3,481). It’s all broth from here. The dividend yield is quite low at 0.7%, but that’s because the share price has risen so much over the years.
Best dollar profit – Nvidia
By 2020, I stopped buying new dividend stocks because I realized that Ms. RB40 wanted to stay in business. I refocused on growth stocks and got very lucky. At that time, Facebook changed its name to Meta to pivot around the Metaverse. I was on board and bought Nvidia, Meta, and Unity. Unfortunately, the Metaverse did not work out as Mark Zuckerberg envisioned. All Metaverse related stocks fell, but I held on. However, AI exploded onto the scene and gave Nvidia a huge boost. I sold 60% of my holdings in NVDA to make a profit. That wasn’t very smart because the stock rose even more. Fortunately, I knew enough to hold some stocks. Anyway, the 1,000 Nvidia shares in my dividend portfolio had an unrealized gain of $126,480. Win the jackpot! The 60% I sold was in my Roth IRA. META has been performing very well recently. It’s in my Roth IRA too.
There are only two losers left – U and INMD
I’ve eliminated many losers over the years and there are only 2 left – Unity and InMode. Maybe I should get rid of these stocks too.
30 year bonds
I have a $2,000 30-year US Treasury bond at 4.125%. I thought I would sell it once prices dropped. We also had a group of one-year bonds that matured earlier this year. I moved the money into a total stock market index fund, VTSAX.
Clean 2024 – INTC, LEG, NLY, WU, EMN, DIS
Finally, I sold all of my INTC shares. I should have sold them when the stock was $60. I think I held onto them for sentimental reasons. I also got rid of LEG, NLY, WU and EMN. All of these companies faced some problems.
As for Disney, I bought it in 2019 when it paid good dividends. Unfortunately, Disney cut its dividend during the pandemic and has performed poorly over the past few years. They got a pop last week so I sold some shares.
I bond
We have about $70,000 of Series I savings bonds in the US Treasury. This will be our cash cushion when the RB40 finally retires. I plan to build this position to around $200,000. If the market crashes, we can roll back bonds as needed. In 2024, we will receive about $2,150 in interest from the I Bonds. The I Bonds are not included in the dividend portfolio above. Next week, I will convert all of my money market stocks into bonds worth about $30,000.
Go ahead
Going forward, I plan to avoid individual stocks. According to Vanguard, the rate of return is 12.3% per year. That’s all very well, but it was all luck. If we remove NVDA, the index fund’s performance will be lower than expected. My earnings portfolio had quite a few stinkers in it. That is, I held INTC shares for 24 years for a very long time. I should have sold them a long time ago.
The problem is that I don’t follow the stock market anymore. Some dividend stocks have deteriorated over the years and are not good companies anymore. I usually miss the problem until later. One such firm is Leggett & Platt, LEG. They paid good dividends when I bought the stock years ago. However, the business has faced difficulties recently. If I had followed through, I would have known to sell the stock earlier.
From now on, I’ll be directing everything into index funds and bonds. At this point, I need to streamline our finances. Ms RB40 will need to take over at some point and I don’t want to confuse it with individual stocks. Anyway, I’m very happy with our dividend portfolio so far. Everyone looks like a genius when the stock market goes up, right?
Do you invest in dividend-paying stocks? What is your strategy?
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Passive income is the key to early retirement. This year, Joe is investing in commercial real estate with CrowdStreet. They have many projects all over the USA so check them out!
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