Saturday, January 04, 2014

Gunning For Stock Dividend Passive Income

It is my wish to obtain at least $50,000 per annum in passive dividend income from my stock portfolio within the next 3 years.

This is quite a tall order but if achieved, will allow me to 'retire' early and start on the many things I've always wanted to do later in life. That's because it translates to an approximate monthly take-home 'pay' of ~$4.2K, which is pretty decent on its own.

So how am I supposed to get there?

Well to receive $50,000 in dividends annually, assuming a realistic average combined dividend yield of 5% on my portfolio, I will need to have $1mio in stocks. If we assume a more pessimistic average combined dividend yield of 3%, then I will need to have about $1.65mio. On the optimistic end, a yield of 7% means I will need only about $715K.

What this implies is that:

1) Stock selection is crucial
Getting into a stock that not only pays a high dividend but also has enough growth prospects to sustain this dividend for years to come.

2) Value investing
Investing based on good value with plenty of margin of safety will be very important too.

3) Taking profit/cutting loss at the right time
This is also important because discipline will ensure that money is saved. It is always important to know when to get off a sinking ship.

4) Read, read and read somemore
As much research and annual reports as possible, to know the latest news and updates about potential acquisitions and current holdings.

5) Save as much as possible
This is where the 'ammo' comes in. So it is important that while I still have my day job I have to try and save as much as I possibly can.

Hopefully with these rules I will be able to achieve my target.

Trade safe!

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