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Saturday, May 9, 2015

Dividend Income Updates - "The Power of Dividends"‏

The month of May has always been a favourite month for proponents of cashflow and investors piling on a dividend investing strategy because that’s when most companies pay out their final dividends based on the previous financial year result. What this means for investors is a direct income received through owning part ownership of the companies you are vested in that you can use to spend on anything that catches interest to you, be it shopping or travelling. Even if nothing interests you, you are able to top up your emergency funds or reinvest the dividends to purchase more ownership stake in order to get higher dividends the following year.




I have always been a proponent of dividend investing strategy because of my preference for cashflow. When I first started the strategy back in 2010, I became almost quite excited by what I found to be a very robust strategy. The tangible benefits of dividends are obvious. They are hard cold cash that you can almost immediately spend on anything and they are usually paid through earnings that the company has generated for the past year. As investors, the difficulty lies in trying to figure out the sustainability of the dividend payouts paid through the earnings of the company, especially in times when the economy is not very kind to businesses. 

As minority shareholders, the dividend income we get are usually not as significant to what the other big players do. But we are wrong if we simply discount it the way we did earlier. Small pieces of dividend incomes do add up over time, especially if you are vested in multiple businesses that consistently pay out sustainable dividends over time. Think of it from a snowball analogy rolling down the hill. The snowball started as small when you roll them at the beginning but it becomes larger as it rolls a few times. This is exactly what the power of compounding is all about.




I have received quite a fair bit of dividends this month, which I'm sure it helps tide around one way or another. Without further ado, these are the amount of dividend income I will be receiving in the month of May:


CountersDividends (S$)
China Merchant Pacific2,415.00
FraserCenterPoint Trust (FCT)296.00
FraserCommercial Trust (FCOT)261.00
Vicom1,095.00
ST Engineering440.00
Total4,507.00


The total amount of dividends received (to be) amounted to $4,507. This is almost as significant it can get because they can cover a whole lot of expenses for the month and free up more cashflow for other use. At the same time, I've also received a bonus share (sort of dividend in specie) of 3,450 shares from CMP after the company issued a bonus consolidation of 20 for 1 share. From a market value point of view, they are worth around $3,830 so I''ll take it as if it's a dividend in specie and will include them in this month portfolio updates.

Dividend investing continues to play a big part in my plans to move away from the corporate world one day and the longer these snowball rolls, the faster I am probably able to reach that stage. As always, the purpose of these updates is to provide a transparency and motivations to myself more than anything else. It is also to allow others to understand that these are feasible options that anyone can start with whatever amount they've got at start.

The traditional rules apply. Save. Research. Invest. Repeat them consistently and we'll probably see the fruits of our labor reaping pretty soon.

In the meantime, Happy month of May and enjoy the fruits of those dividends for fellow investors!!!

What about you? How is May coming along for you?


20 comments:

  1. April has just passed, and you've already gotten a head start on May. A few companies also pay dividend at the beginning of May, so I'm waiting for all the money to roll in to reinvest.

    I had a late start in the dividend investing strategy but I'll get there some day, hopefully.

    ReplyDelete
    Replies
    1. Hi Vivianne

      I had no doubt you'll be there someday, as all of us will some day. It'll be interesting to see how the month of May has given us some bits of cashflow to generate more income for us this month.

      Delete
  2. Hello great blog! But just like to see what are your views on the usual pattern of the share price dropping after the ex-div date, sometimes by more than the div amount itself. In such instances, would it make sense to sell before ex-div date and buy back later, assuming that the share price plunges by a disproportinate amount?

    ReplyDelete
    Replies
    1. Hi Robert

      That's actually a strategy that some of the people might have used. I don't generally have any preference to do that because first you'll be playing around with the commission charges and secondly it's not a sure certainty that the price might go down by more than the amount of dividend received.

      I'm not sure if that pays off in the long run.

      Delete
  3. Hi B,

    Agree on the power of dividends. It's even sweeter when the dividends can be reinvested in DRP scheme to save on the commission charges!

    Do you prefer to participate in DRP or cash out normally?

    ReplyDelete
    Replies
    1. Hi Rolf

      I've actually never done a DRIP in my investment so far. I think it's great to do that if the amount is substantial but usually it just ends up in the odd lots which makes it very confusing to keep track and update. Just imo.

      Delete
  4. Great job with your dividend income. Nice graphic too by the way. Everyone loves a growing dividend snowball. In the U.S. everyone like the end of quarters, March, June, September and December as that's when most companies pay their dividends here. Thanks for sharing.

    ReplyDelete
    Replies
    1. Hi Divhut

      Many thanks for your comments.

      I think in the US they are paid much frequently spread around the 12 months which is a nice way to do some budgeting but here it's more lumped together in a single quarter/month.

      Thanks for your kind comment.

      Delete
  5. Thanks for sharing B,

    I also hope to one day have a constant dividend stream so I can finally be free. (continues to work towards growing my portfolio first...)

    ReplyDelete
    Replies
    1. Hi Investing Wolf

      Thanks for your encouragement.

      We'll be all there someday, let's keep the determination going and keep going strong.

      Delete
  6. Hi B,

    Happy May indeed! May our snowball getting bigger and bigger. I am getting about half your dividend amounts.

    Probably the second happy month is August?

    Cheers,
    Farmer.

    ReplyDelete
  7. Hi PIF

    Glad to know you are doing as well too for this month.

    My second biggest month would probably be November, guess that's some time away now ;)

    ReplyDelete
    Replies
    1. Hi B,

      I think CMP is paying dividends in Jun?

      Farmer.

      Delete
    2. Hi PIF

      Thanks for pointing that out.

      Delete
  8. Wow looks like you are going to have a great month! This is the first month that I will be receiving dividends since converting to a dividend growth investor so I am very excited.

    ReplyDelete
    Replies
    1. Hi Ken

      Please let me know your experience going into dividend growth investor. I think you'll love it ;)

      Delete
  9. Great post. I am such a HUGE fan of dividend paying stocks. I feel is just awesome to benefit not only from stock price appreciation but also get a nice "bonus" from the company every three months! I always tell people just getting started with investing to start off with dividend payers. I like to keep an eye on the dividend payout ratio and it not exceeding ~60% or so. You also dont want a company that has to borrow to pay dividends that would defeat the purpose. Anyways, thanks for sharing this post. Do you get involved with DRIPS as well? (dividend reimbursement programs).

    ReplyDelete
    Replies
    1. Hi Mabel

      Thanks for your compliment.

      You pointed it out right. We dont want a company that tends to pay out aggressively during good times but cut back during bad times. We rather have a steady growth increase every year while the company continues to grow.

      I dont generally do drips because it ends up in odd number of shares which can become pretty messy. I usually take cash but may consider when my position gets larger.

      Delete
  10. Great month! Those types of dividends would cover nearly half of my yearly expenses.

    Cash is king, and assets that generate the cash are the kingdom.

    Red to Riches
    I agree with taking the cash and then figuring out the best way to deploy it. And it's easier for tax purposes :)

    ReplyDelete
    Replies
    1. Hi R2R

      Thanks for leaving your comments. Appreciate it.

      These dividends tend to come in one big sum for the month of May, how I wish it could be so often in other parts of the year. You look like you have quite a low expenses to go by every month. This could probably cover 1.5 months at most of my expenses but that's about it, I'll have to source out to find for more again.

      Delete

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