Dividends Archives - MoneyWatch101

What Can you Buy with Dividends

This post idea came to my mind as I was washing dishes, and I thought of at least 10 things I can buy with dividends. What can you buy with dividends? Well it depends if you actually are in a position to receive them. If you are like some people who believe the government will take all our investments, then you clearly don’t invest in the stock market. What can you buy with dividends is the topic of the hour and I love this topic.

Lets play a little game and think of the possibilities available for the investor who can successfully receive 5 thousand in dividends and doesn’t need the additional income to live off of. Now you can visualize all the fun you can have with an extra 5K annually.

What Can you Buy with Dividends?

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Nordstrom’s Stock

Hey did you know that Nordstrom’s stock is a dividend payer? I was recently asked what I thought about Nordstrom’s stock and if it’s a good value right now. Given the fact that the market has been frothy aka yuppie word for high, I will try to give it a fair valuation. The company is in the Apparel and accessories sector & industry and was founded in 1901. They operate about 300 retail stores mostly in US, (about 6 in Canada) and have several websites under different brand names. Even though I assume most of the products from those websites will come from Nordstrom’s inventories. The websites are Hautelook, Trunkclub, and Nordstromrack.com. I assume they will have continued success with those websites as the popularity of online shopping increases. Nordstrom’s is expanding faster into the Nordstrom’s Rack name brand, and my guess is because they desire to offer cheaper outlet based priced products and gain market share in that space.

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The Dividend Challenge

I am obsessed with growing dividends and seeing them compound every year. Well now I am doing a crush the dividend challenge. (#dividendchallenge) The purpose is to well increase the dividends in 2015 and surpass what was received in 2014.

If you make the gap bigger between last year and this year you will experience year over year growth. The benefit of dividends will not only give you a greater sense of return on your money, but it will also provide the opportunity to get even more shares going forward. If you do this, you will invest on purpose for increasing dividends aka icing on the cake in my opinion.

Imagine getting 10K a year from dividends in 2015 and letting things compound. By the year 2020 can you imagine how much you will get from dividends? Its safe to say it will be more than 15 thousand dollars of free money just for holding an asset.

What in life gives you free money for holding it? Nothing does and only investments do. Now are you ready to crush the dividend challenge?

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What is the Best Cash Flow Investment

What is Cash Flow?

Have you ever desired to have more cash flow? Well I am on a mission to find out what is the best option for anyone interested in learning about cash flow and learning how to build it. Anyone looking to be financially free and cash flow free must begin finding ways to get multiple streams of income. The cash flow from dividends is a vital piece of the puzzle I believe. I think for the sake of making things easy and for comparison options let’s keep the numbers for all the investing options at 1 grand. The examples below are possible dividend figures for folks looking to increase cash flow.

What is the Best Cash Flow Investment:

1 Thousand Invested Options –

The Low price company stock option:

GE – 1000 / $26.53 per Share = 37.69 shares X .22 QTR dividend = $8.29 QTRLY (3.32% Yield)

The Mid-Priced Company Stock option:

TGT -1000 / 58.79 per share = 17 shares x .52 QTR dividend = $8.84 QTRLY (3.54% Yield)

The High price company stock with greater future returns option:

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Dividend December

Hey readers did you know that December is the ultimate month for dividend income. Most companies pay dividends and capital gains in December, and it has me smiling all the way to the bank. I enjoy the Holiday cheer in this month, because of the unity I get from joyous gatherings with family. All extra money injected into my retirement accounts is just gravy. As of right now I am reinvesting all those earnings to net me more shares and more income for 2014. The compounding effect is growing and I am happy to know that each penny earns me more shares every year. If you grasp this financial tip early on in life you will grow assets exponentially. I wonder if all you readers feel the same way about Dividend December being a great month. If you are not aware then pay close attention to what you are earning in investments, it will allow you the information to make necessary changes for the future.

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Dividend Stocks

I think that investing in dividend paying stocks needs to be a necessity for anybody who is serious about retiring early, wishes to gain wealth, and hopes to be a decent philanthropist in the future. Many people understand the concept behind dividend stocks, but at the same time are scared to pull the trigger and become an owner of a publicly traded company. Why you may ask?

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Income Sources

Most of you all already know that you can earn income from many different ways. But maybe you didn’t know the actual categories each income source belongs too. I wanted to share with all of you these income sources and give you a brief description and hopefully you can understand how you earn your money better. Personal finance is hard to figure out for many people, but this post will get you one step closer to understanding how one income source favors the other.

Income Sources:

Earned
Portfolio
Passive

Brief Descriptions of each Source:

Earned – Income derived from working for someone else or from a business you own or are a part of. This type of income is taxed the highest out of all the other incomes. It is also the biggest chunk of tax the government makes off individuals for GDP Revenue. In certain situations this type of income can be taxed at and up to 50% of the gross amount you make. The reason being that in this income type you have to pay Social security and medicare taxes.

Portfolio – Income derived from investments including dividends, interest, royalties, and capital gains. When you put your money in a savings account and the bank pays you for having it there that is considered portfolio income. If you write a book, then the royalties of the book sales are considered portfolio income. The tax implications from these types of incomes can be confusing, but dividends and capital gains taxes usually are up to a max of 20% and royalties can be taxed like self-employment ordinary income.

Passive – Income made of work in which you do not actively participate in. Examples include Rental real estate and silent business arraignments. This type of income is what people call gravy because you do not have to put your blood, sweat, and tears into it. Building a rental real estate empire is considered passive income for tax purposes, but believe me when I tell you managing something like a rental empire does take a lot of participation unless you hire a management company and reduce your time commitment.

In the United States people make the mistake to think that income from dividends are considered passive income and this is a mistake, the IRS clearly defines that type of income as portfolio. In my opinion I believe it is mandatory to try to build income from all three sources and then to begin to eliminate earned income and focus on growing the portfolio and passive income sources. If you can eventually grow your portfolio and passive income to cover all expenses then you are finally considered financially free.

Comment to let me know what are your thoughts to the three types of income sources listed above.

Always consult with a tax professional if you have a tax related question or if you are receiving income from different sources as mentioned above. If your taxes are complicated always consult with a certified CPA professional.

RichUncle EL