My favorite line from the Bruce Springsteen song Badlands is “Talk about a dream, try to make it real.” In the financial blogosphere, I can think of no one who follows that adage better than Jason Fieber, the writer at the website www.dividendmantra.com. I highly encourage you to click over to his website and follow him regularly.
I can think of no other dividend investor out there who is so explicit about his goals and what he wants out of life, and then documents his process of making it happen. His goal is to become financially independent by forty years old. The income from dividend-paying businesses are the means by which he is accomplishing his goals.
And he does something else that almost no one else on the internet does: he documents the process step by step. He tells you how much he makes each month, how much he spends, and how much he invests. He often provides a link that demonstrates his investments in real time, the rationale for the investment, and a snapshot of his entire portfolio. I am aware of no one else that writes with that kind of transparency both with his budgeting and individual investment selection.
I certainly couldn’t do it. It takes a lot of courage opening yourself up to the peanut gallery online, where people can hide behind an anonymous screen and spew vile things in a judgmental fashion. I could only imagine what would happen if I did something like that. Tim, why the hell did you spend $25 on a Cardinals ticket? If you waited a week to see the Rockies, you could have gotten a ticket for $12! Why did you eat out at Chick-Fil-A two days in a row? Those chicken sandwiches aren’t free.
Yeah, I wouldn’t have the right temperament to deal with that. But Jason writes the perfect blog that documents what the journey looks like when you clearly identify your dreams, and then put in the hard work each month to make them happen. His blog is probably the greatest living case study on the dividend growth investing strategy that you can find online. I highly recommend that you check his blog out.
For me, the greatest benefit of following someone like Jason is that it shows you how great the style of dividend growth is when you have passive income compounding silently while you go through life’s journey. Take Jason’s largest position in Philip Morris International, for example. On his site, Jason indicates that he owns 100 shares of the international tobacco giant. The company has been paying an $0.85 quarterly dividend, for about $3.40 per year. Right now, those 100 shares generate $340 per year. Assuming the next dividend increase is around 8%, the tobacco giant will be paying Jason $367 next year.
Is that $27, by itself, life changing? No, it is not. But it is just one of thirty-three positions that Jason holds. He already expended that energy acquiring shares. In the here and now, Jason is focusing on his work and acquiring new capital surplus to invest. Meanwhile, he is reaping the rewards of intelligent past life decisions. He has thirty-three little money machines that are giving him $5 annual raises here, $15 annual raises there, and so on. Thirty-three. Owning excellent businesses can be addicting because you continue to receive ever-increasing rewards from decisions that your past self made.
What I like about Jason’s process is that it mirrors my own. My philosophy is to accumulate surplus capital, acquire a high-quality cash generating asset, and then focus on acquiring new capital for new cash-generating assets while you start to receive the rewards from previous decisions that you have made. The greatness of dividend growth investing is the fact that the energy is all up front. Once you expend that initial capital, you get to sit on your rear while you automatically receive cash rewards in the here and now because a younger version of yourself appreciated the seemingly forgotten principle of delayed gratification.
And none of this even touches upon dividend reinvestment, which can accelerate things even further. I pointed out that Jason could realistically grow his Philip Morris International Income from $340 to $367 annually, but you can do better than that if you choose to delay gratification even more by engaging in dividend reinvestment. Let’s say Jason checked the “reinvest dividends” box and plowed those $340 back into shares of the international tobacco giant. That would pick him up 3.73 new shares. That way, when that 8% dividend increase comes around, Jason would be working from a base of 103.73 shares instead of 100 shares. That would give Jason $381 in new annual income instead of $367. That 8% dividend increase really gave Jason a 12% year over year increase when you mix dividend growth with dividend reinvestment. And that is just one year’s difference. Imagine what happens when you spend a decade intermingling dividend growth, dividend reinvestment, and fresh capital investments.
That is why I encourage you to read Jason’s blog. It is a real live laboratory exercise documenting one man’s application of a dividend growth strategy to his dreams. That story that is hard to beat.
Originally posted 2013-06-12 09:00:16.