I finally got my last dividend payment of 2021, so it's time for an annual update! I also recorded a video, so if you prefer to watch instead of read, feel free to click on the video below. If not, all the details are in this post too.
Quicklinks:
In 2020, I received $1,168.74 in dividends, and that grew to $1,764.80 in 2021 - a 51% increase! I'm really happy with the growth this year, which mainly came from new purchases of stocks.
Looking ahead to 2022, even if I don't add anything to my portfolio, there’s going to be a 46% increase which will push past the $2,000 mark to $2,573.81, which is massive.
Here's a breakdown of the different components of our dividend payments. I participate in my employer's share programme, which generates a 3.5% dividend yield. We also have an index that tracks the S&P500, this year we also picked up shares in a REIT ETF, which is currenly yielding 4.6%.
Taking a look back to 2020, I only had Walgreens (WBA) in my portfolio, and even then I only received one dividend payout. The total amount of dividends received in 2021 for WBA was just under $385, and all of that was automatically reinvested to buy just over 5 additional shares, so I’ll start 2022 with 206 shares, rounded down.
And that’s what I really love about dividend investing, watching your dividends buy you more shares, which then pay you more dividends which buys more shares - compounding is awesome.
My new purchases this year were Clorox and 3M. I wanted to pick up dividend stocks earlier in the year to start getting dividend payouts as soon as possible, but because I only picked them up in September, I only got 1 dividend payment for each of these holdings, and about half an additional share was bought through reinvesting dividends.
By the way, the reason for me only buying shares late in the year isn’t so much a result of trying to time the market, but because I wanted to get a good entry price by selling options. I have a post that explains how I bought my 100 shares of CLX at a $2,600 discount in more detail.
All in, with the benefit of a full year of dividend payments and extra shares from DRIPs, I should get at least $1,455.22 from these 3 holdings in 2022.
I say at least because all 3 companies I'm invested in are on the dividend aristocrat list - which is a list of companies that have raised dividends annually for more than 25 years. As of 2021, there are only 65 stocks on this list.
Both CLX and WBA have raised their dividend for 45 years and 3M has raised theirs for a whopping 63 years. Barring some major catastrophic event, this trend should hopefully continue for 2022, which will lead to higher dividend payouts.
Combined with reinvesting dividends to DRIP even more shares, I should be looking at a higher dividend amount in 2022 than $1,455.22.
Finally, let’s talk about goals. Believe it or not, I don’t like setting dividend goals for two reasons:
1) Dividend payouts, raises and cuts are beyond my control. I’ll do what I can to buy the best companies that raise dividends every year, but that’s not a given.
2) Because I prefer to use options to initiate positions at a lower cost basis. This means that by the time I actually buy the stock, I may have missed earlier dividend payments, similar to how I only received one dividend payment for both CLX and MMM this year.
That said, I do have a two goals for my dividend portfolio that are within my control:
1) To allocate at least $30,000 towards the purchase of quality dividend paying stocks.
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2) To diversify against my current stock holdings. That means avoiding direct competitors like Colgate (CL), Proctor & Gamble (PG) or CVS, unless they really sell off and provide a great buying opportunity.
Some sectors I’m considering are healthcare and pharma like Johnson & Johnson (JNJ) or Abbvie (ABBV), F&B options like McDonald’s (MCD) or Starbucks (SBUX), or even tech like Apple (AAPL) or Microsoft (MSFT). These aren’t recommendations, just examples of the categories and companies that don’t overlap and would provide more diversification.
I’ll update any purchases here as well as on my social channels, so be sure to follow at least one of these sources.