Back in 2012, I decided to leave my engineering job, and as a result, our household income took a significant 65% hit. Quite a punch in the wallet, but fortunately, we were ready for it. We were already living a pretty modest lifestyle, and I boosted our passive income by diving into dividend stocks, rental properties, and a few side hustles. It turned out to be a stroke of luck since everything has fallen into place beautifully over the past twelve years. Our income from these sources has grown to the point where it now comfortably covers our expenses.
It’s been a while since I last gave an update on our taxable account, so today seems like a good time to do so, focusing mainly on our dividend portfolio.
Dividend income has become my favorite kind of income because it’s incredibly hands-off. Once you set things up, the dividends keep coming in and generally increase over time. I used to be a fan of rental properties, but they require much more effort than I’m willing to give these days. No more DIY landlord life for me! Now, I prefer Real Estate Crowdfunding for real estate investments. I get the benefits without dealing with the property issues myself. The only nuisance with real estate crowdfunding is the tax paperwork. Some project sponsors often delay the necessary K1 forms, leading me to request tax extensions every year—frustrating but manageable. Besides, the pandemic paired with high interest rates threw a wrench in some projects. But let’s steer this back to the dividend portfolio.
### Evolution of the Dividend Portfolio
Before retirement, our taxable account leaned heavily on index funds and growth stocks. Once I retired, my goal shifted to boosting passive income, which led me to focus on dividend growth stocks—companies known for consistently increasing their dividends. I had assumed that Mrs. RB40 would also retire in a few years, specifically aiming for 2020. However, that didn’t unfold as planned. She thrives on being productive and giving back to society, so she chose to keep working. Understanding her perspective, I scaled back on dividend stock investments. While dividend income is nice, it does come with annual tax obligations, which is why I pivoted back to growth stocks in recent years. They’ve been performing exceptionally well.
### Dividend Income
Take a look at this chart—a timeline of our dividend income since 2012. It’s grown steadily and reached its peak in 2019. If I’d stuck to dividends religiously, our income today might be significantly higher. I confess, I get a tad envious when I see reports like Bob’s portfolio, which brings in an impressive $4,500 monthly in dividends. But hey, we’re still doing quite well ourselves.
### Growth of the Portfolio
Our portfolio has blossomed nicely over the last few years, primarily due to fortunate moves. Since 2019, I’ve shifted focus to increasing our passive income via real estate crowdfunding, not adding much cash to the dividend portfolio. I’m happy to report that it’s been a smart move. You can check out the performance of our real estate crowdfunding ventures elsewhere.
### Individual Stocks
Let’s dive into the details with this spreadsheet. For 2024, the dividend portfolio has an overall yield of 1.81%, which is on the lower side for dividend-focused investments. The portfolio may look like it’s performing better than it truly is, mostly because I’ve strategically phased out some underperformers for tax advantages. Here’s some of the standout performers.
### Best Percentage Gain – Eli Lilly
I bought Eli Lilly shares back in 2011, marking the start of my dividend investing journey. It’s turned out to be a stellar choice with a phenomenal gain of 2,044%! This year wasn’t all smooth sailing for them, but despite a few hurdles, LLY remains our top dividend pick. What makes this sweeter is that the total dividends ($3,683) have finally exceeded what we initially paid for the stock ($3,481). Despite a humble dividend yield of 0.7%, it’s mainly because the stock’s value has surged so massively over time.
### Best $ Gain – Nvidia
In 2020, I halted acquiring new dividend stocks since Mrs. RB40 had found contentment in her career. Consequently, I focused on growth stocks and that decision paid off. Following Facebook’s bold rebranding to Meta, I jumped on the bandwagon and snapped up Nvidia, Meta, and Unity stocks. Although the Metaverse hype didn’t pan out as expected, Nvidia got a huge boost thanks to the AI wave. I cashed in on 60% of my Nvidia shares, which in hindsight, might have been hasty as it climbed even higher. Fortunately, I held onto some shares, leading to an impressive $126,480 in unrealized gains from the remaining 1,000 Nvidia shares in the portfolio. The ones I sold were in my Roth IRA. Meta has also been performing well lately, which I also hold within my Roth IRA.
### Only 2 Losers Left – U and INMD
Over the years, I’ve weeded out most non-performers, yet Unity (U) and InMode (INMD) remain. I’m likely to sell these in the near future.
### 30-Year Bonds
I have a $2,000 lot of 30-year U.S. Treasury bonds earning 4.125%. I plan to sell those once interest rates drop. Earlier this year, a stash of 1-year bonds matured, prompting me to shift the funds into a Total Stock Market Index Fund, the VTSAX.
### 2024 Cleanup – INTC, LEG, NLY, WU, EMN, and DIS
I finally parted ways with my Intel (INTC) stocks. In hindsight, selling them when they were at $60/share would have been wiser. Nostalgia kept me holding onto them for too long. I also cleared my positions in LEG, NLY, WU, and EMN as these companies faced various challenges. Regarding Disney, I invested back in 2019 due to their generous dividends, but their decision to slash those during the pandemic and recent underperformance made me reconsider. I capitalized on a small uptick last week to offload some shares.
### I Bonds
We hold about $70,000 in Series I Savings Bonds with the US Treasury, serving as a financial cushion for Mrs. RB40’s eventual retirement. The goal is to double this to about $200,000 for more robust security. Should the market take a downturn, these I Bonds are there to soften the blow. In 2024, they’re set to yield around $2,150 in interest—a tidy sum not factored into the dividend portfolio above. Next week, I’m moving about $30,000 from money market shares into I Bonds to bolster this fund.
### Going Forward
Moving forward, I’m aiming to steer clear of individual stocks. Despite an annual return rate of 12.3% as reported by Vanguard, I attribute much of this to sheer luck. Excluding NVDA’s fortunate performance, our progress would lag behind index funds. Sadly, my portfolio had its share of duds, like clinging onto INTC for 24 years too long. Keeping track of the market isn’t something I’m invested in anymore. Some of the stock holdings deteriorated over time, slipping from their once high stature. LEG is a prime example—attractive dividends marred by a struggling business climate. Missing these shifts has made me rethink my approach.
Going forward, my investments will emphasize index funds and I Bonds. Simplifying our finances is crucial for the eventual handover to Mrs. RB40, sparing her the complexities of managing individual stocks. All told, I’m pleased with how our dividend portfolio has fared. Let’s face it, anyone can look like a genius when the market’s on an upswing, right?
What about you? Are dividend stocks part of your investment strategy? How do you go about it?
