Another year has passed us by, so quickly I barely noticed. We all made new memories and have experiences changes in one or another way. Indeed, 2018 has been an exciting year, with many ups and downs. When looking at the equity markets, the downs literally have taken over control in the past two months. With S&P 500 dropped by almost 10%, December 2018 was one of the worst Decembers in the history. No wonder we were fluted with doomsday news that spread fear among people.
However fear is a bad advisor and the number one reason why many individuals end up losing money in the stock market. Keep in mind: human emotion is the single-best enemy of an investor. We dislike losses so much (much more than we like gains) that we barely can’t sit still while markets are going down. As a consequence many investors sell their holdings and participate in the losing game of timing the market.
A jug fills drop by drop
But there is good news for those who search to fight loss aversion and finally build long-term wealth over time. Keep on investing consistently. Step by step. Think of your portfolio as it is a business. You don’t want to find a perfect moment to liquidate your business. Rather you want to invest in it and maximize its long-term cash flows and value. Just like Johnson & Johnson (JNJ) or Pepsi (PEP) don’t try to time the global economy by shutting down their operations during times of economic turbulence, the same should be valid to your holdings.
That is why I focus on growing the income stream of my portfolio by consistently collecting great businesses. I’m filling this jug drop by drop. No matter how bad the downturn might appear, these companies will most certainly deliver reliable dividend payments. That being said, here is my dividend income report for 2018.
Monthly dividend review: December 2018
In December I have received dividend payments from twelve companies and one ETF:
- Enbridge (ENB): €12.97
- Visa (V): €1.63
- Unilever (UL): €11.22
- LBrands (LB): €11.75
- IBM (IBM): €8.17
- Johnson & Johnson (JNJ): €14.67
- Home Depot (HD): €5.37
- Coca-Cola (KO): €6.93
- ETF Europe 600: €4.17
- Royal Dutch Shell (RDS): €11.99
- BlackRock (BLK): €8.16
- Broadcom (AVGO): €13.73
- Union Pacific Corp (UNP): €6.22
December’s dividend income came in at €116.98 ($133.36) in total. That is a 32% increase compared to December 2017 (€88.58). I welcome three new contributors. V, HD and BLK have sent a dividend check for the first time. All in all December ended up to be my fourth strongest month when it comes to payout. Now let’s have a look on the full year performance.
Yearly dividend review: 2018
After having logged in Decembers dividend income, the final picture for the whole year 2018 looks as follows:
|January||€ 25.26||€ 9.78||+158%|
|February||€ 55.35||€ 17.92||+209%|
|March||€ 107.33||€ 100.05||+7%|
|April||€ 84.92||€ 66.47||+28%|
|May||€ 177.26||€ 108.73||+63%|
|June||€ 103.13||€ 70.66||+46%|
|July||€ 50.96||€ 24.99||+104%|
|August||€ 190.84||€ 43.00||+344%|
|September||€ 125.87||€ 95.43||+32%|
|October||€ 54.34||€ 23.83||+128%|
|November||€ 71.56||€ 50.49||+42%|
|December||€ 116.98||€ 88.58||+32%|
|Total||€ 1,163.80||€ 699.93||+66%|
In total the SF portfolio has generated €1,163.80 ($1,373) in annual dividend income in 2018. A 66% increase compared to the final result in 2017 of €699.93 ($798). The major part of this gain is due to new capital deployed. I don’t expect this growth to continue when I am out of the accumulation phase. In fact, I count with a more realistic organic dividend growth rate of 6 – 7% (which is comparable to the growth in March).
August 2018 experienced the largest raise. On a monthly basis the dividend payment increased by 344% VS. previous year. The reason is simply a shift from reinvesting to distributing policy by my major ETF provider. This one-time effect won’t matter in 2019 since I have liquidated my index funds and totally focus on individual stocks now (read more about it here: Tweaking the SF portfolio). Below I have added two charts that show the month-to-month as well as the accumulated performance comparison.
In the end of the year, the green line is well above the brown one. I’m more than happy about the final result. It keeps me focused and motivated for 2019. Indeed, watching the passive income grow is a huge encouragement to stay on the DGI path. It is a perfect proof how well this strategy works. Each acquisition, each dividend hike is a drop that fills the jug. I can’t wait to keep filling it and enjoy the ride along the way.
Long-term dividend review
Another metaphor that I like, is viewing the journey towards FI as climbing stairs. With every year passing, we climb one step up. Sure, It’s a long-term process. But thanks to the power of compounding, the later steps bring us much faster to the end goal. This is how my personal climbing-stairs-process looks like:
Since inception, I have climbed four steps and crossed a four-digit annual income in 2018. There are 17 stairs left, assuming my assumptions do not change over time. Well, many factors might shift as years are passing by. This changes could favour or handicap the journey. I’m fully aware of this. However keeping record of the progress allow us to have the goal in front of our eyes and make some adjustments if needed.
Sure, I could achieve my goal faster. However I want to enjoy life today while building an income stream for tomorrow. This is not a contradiction to me. By enjoying life, I don’t mean buying and collecting fancy products. Not that I don’t value good things. I can very much enjoy driving a nice car or wearing a fine suit. But I’ve learnt that it doesn’t bring me long-lasting pleasure. The thrill always fades after a while. Thus I rather try to focus on gathering great experiences and moments. Hopefully 2019 will be rich in opportunities to make some great memories! Best of success to you all. Have a great start into the new year!