Any serious dividend investor would tell you it’s a bad idea to invest in stocks solely because they pay a monthly dividend. They’d also tell you it’s an especially bad idea to invest simply because a security has a high yield.
With my real job and my real investments, I’m playing it very safe by investing in a total stock market fund and a bond fund based on my actual appetite for risk as well as my timeline. With this beer money dividends side hustle, however, I’ve essentially been speculating.
And even though I’ve been taking speculative positions, my first goal – like every investor – is to not lose money. That’s also my second goal. But my third goal is to produce a stable, safe stream of $100 dollars a month in passive income.
Because of that I see this portfolio as that of a dividend income investor rather than a dividend growth investor. Despite the fact that I’m aiming for income, I still want to safeguard this portfolio against any future downturns, and not just in the stock market, but in any of my investments.
With that, and because I had such an extraordinary month in August with just over $900 dollars in beer money income, I’m branching out. I’m taking the approach of not just a dividend growth investor, but a value investor. If I don’t, I’ll be losing money to inflation, especially if I don’t drip the investments in the future. I want my dividends to grow each year, not just pay the same, especially if the investment’s value remains relatively unchanged.
If the worst idea is to invest solely for a monthly dividend payout, there must be a second worst option for dividend income investing. And there is. But it’s difficult.
That option involves finding good quality companies that pay dividends quarterly with a roughly equal payout that also allows for a payment schedule to cover every month of the year. So for instance, one investment may pay dividends in January, April, July, and October, while another may pay in February, May, August, and November.
If I can find good quality companies that pay dividends that are roughly equal to each other and that cover every month of the year, then the risk associated with my goal for monthly income and liquidity will drop dramatically. So will my yield. But with the income I’ve made this month I think I want to keep my dividend growth steady rather than blow it all on riskier investments with a higher yield so that I can maintain this income portfolio for years.