Almost everyone talks about "beating the S&P 500" or "outperforming the index" but very few talk about steady, reliable, and increasing dividends. It's probably not as sexy but dividends help pay the bills! 😉😊
I started working on an "income portfolio" containing mostly REITs and BDCs in 2022. The portfolio is in a taxable account so I can access it during my working year in case an emergency comes up. I try to contribute $100 - $200 every week. The goal is to have 20 positions such that each delivers the same dollar value. Some positions will have a higher weight than others due to differences in dividend yields.
I started the portfolio with the idea the dividends should cover one bill, like my electricity bill. Once that was covered, I added the natural gas bill. I think I went to my streaming services next. Then I got a big idea in my head - it should cover my property taxes! I didn't stop there. The next goal is covering my yearly Roth IRA contribution! At $650/month, I have the basic yearly contribution amount covered. Now I need just a little more to cover the catch-up amount. Knowing my luck, the limit will be raised and I'll be chasing a moving target. 😄 I'm OK with that. It's a good problem to have.
Performance wise, the portfolio came close to matching the S&P 500 for a while in 2024. The recent corrections have turned the portfolio into an under-performer. That's actually good news to me! Why? It means asset prices are depressed. Translation:
Income is on sale! 🎉
Lower prices means I can buy more share and increase my income. Lower prices overall means more businesses enter my investable universe. 👍 For example, General Mills is starting to flash on my radar as it's yield is approaching my personal threshold of 4%.
I'm taking a page from Compounding Dividends for 2025 and making it a goal to replace some stagnant dividend payers with growers and to double down on analyzing the financials.
REITs were having a bit of a run-up in prices due to all the excitement about rate cuts. FIdelity was showing my 1-year performance was +26-point-something percent and the S&P500 was at +27-point-something percent. It was cool to see, if even for a little while. 😎
Prices slumped when the outlook on rate cuts became more muted (less cuts and at a slower pace). Then one of my REITs, $IIPR, announced one of their tenants, PharmaCann, defaulted. I looked back at the rent revenues and the resulting FFO and the dividend seems sustainable. One tenant defaulting is not going to obliterate this REIT. Plus, $IIPR has a lot of cash and very low debt. The low price took the yield up to a whopping 11.6%!
Since my income portfolio is so concentrated on REITs, when the sector moved down then my portfolio moved down with it. 📉 Now I show +8.37% for the year. It's these kind of things that I think would freak some people out but I'm in the "meh ... whatever" camp. Why? I rechecked my other REIT and BDC holdings and everything seems fine. Revenues would have to be cut in half (and in some cases, in half again) to knock the dividend. The portfolio value will wibble-wobble up and down but the income stream is stable.
There is one mREIT in my portfolio, $ACRE, that I didn't pay enough attention to in 2024 and it cut its dividend. I'm still holding on to it The yield is 17.5% and I'm afraid another cut may be in the cards. This is the first holding I plan to rotate out of in 2024. I have a few other holdings whose dividend has been stagnant that I plan to rotate out of and move into 1 or 2 dividend growers: $CHI, $STWD, $PFLT, $REXR-B (preferred), $PLDGP (preferred).
Thanks for having me!
Thanks for the great article!
Almost everyone talks about "beating the S&P 500" or "outperforming the index" but very few talk about steady, reliable, and increasing dividends. It's probably not as sexy but dividends help pay the bills! 😉😊
I started working on an "income portfolio" containing mostly REITs and BDCs in 2022. The portfolio is in a taxable account so I can access it during my working year in case an emergency comes up. I try to contribute $100 - $200 every week. The goal is to have 20 positions such that each delivers the same dollar value. Some positions will have a higher weight than others due to differences in dividend yields.
I started the portfolio with the idea the dividends should cover one bill, like my electricity bill. Once that was covered, I added the natural gas bill. I think I went to my streaming services next. Then I got a big idea in my head - it should cover my property taxes! I didn't stop there. The next goal is covering my yearly Roth IRA contribution! At $650/month, I have the basic yearly contribution amount covered. Now I need just a little more to cover the catch-up amount. Knowing my luck, the limit will be raised and I'll be chasing a moving target. 😄 I'm OK with that. It's a good problem to have.
Performance wise, the portfolio came close to matching the S&P 500 for a while in 2024. The recent corrections have turned the portfolio into an under-performer. That's actually good news to me! Why? It means asset prices are depressed. Translation:
Income is on sale! 🎉
Lower prices means I can buy more share and increase my income. Lower prices overall means more businesses enter my investable universe. 👍 For example, General Mills is starting to flash on my radar as it's yield is approaching my personal threshold of 4%.
I'm taking a page from Compounding Dividends for 2025 and making it a goal to replace some stagnant dividend payers with growers and to double down on analyzing the financials.
Thanks for the guest post, Dividendology and TJ!
That's impressive you were close to matching the S&P in 2024. That's hard to do without owning the Mag 7.
Also, love the mindset that income is on sale when prices go down!
REITs were having a bit of a run-up in prices due to all the excitement about rate cuts. FIdelity was showing my 1-year performance was +26-point-something percent and the S&P500 was at +27-point-something percent. It was cool to see, if even for a little while. 😎
Prices slumped when the outlook on rate cuts became more muted (less cuts and at a slower pace). Then one of my REITs, $IIPR, announced one of their tenants, PharmaCann, defaulted. I looked back at the rent revenues and the resulting FFO and the dividend seems sustainable. One tenant defaulting is not going to obliterate this REIT. Plus, $IIPR has a lot of cash and very low debt. The low price took the yield up to a whopping 11.6%!
Since my income portfolio is so concentrated on REITs, when the sector moved down then my portfolio moved down with it. 📉 Now I show +8.37% for the year. It's these kind of things that I think would freak some people out but I'm in the "meh ... whatever" camp. Why? I rechecked my other REIT and BDC holdings and everything seems fine. Revenues would have to be cut in half (and in some cases, in half again) to knock the dividend. The portfolio value will wibble-wobble up and down but the income stream is stable.
There is one mREIT in my portfolio, $ACRE, that I didn't pay enough attention to in 2024 and it cut its dividend. I'm still holding on to it The yield is 17.5% and I'm afraid another cut may be in the cards. This is the first holding I plan to rotate out of in 2024. I have a few other holdings whose dividend has been stagnant that I plan to rotate out of and move into 1 or 2 dividend growers: $CHI, $STWD, $PFLT, $REXR-B (preferred), $PLDGP (preferred).