My $69,000 Dividend Portfolio: EASIEST Passive Income!

hey guys humphrey here so my dividend portfolio currently pays me around 100 a month in passive income and i know that many people are looking for this and i think dividends are a really great way to tap into that they're naturally pretty passive because a dividend is basically a percentage of profit that a company will pass back to their shareholders just for owning that stock so basically if you have a large portfolio of many different dividend stocks you're just getting these dividend payouts regularly over time and when you compound these dividends the effects can actually be really quite amazing in today's video i'll be revealing my exact dividend portfolio that does pay me over a hundred dollars a month we'll talk about how to choose dividend paying stocks my favorite picks in my dividend portfolio the pros and cons of dividends and much much more also a large percentage of my viewers are not subscribed so consider subscribing if you really like this video it's free and you can always change your mind later so whenever you're thinking about how to choose stocks for your dividend portfolio you should be doing some due diligence on that company now there are many different ways to do due diligence but they can be boiled down to basically three steps number one i would definitely go ahead and read their business overview in the 10k annual filing now you can find this filing by going to sec.gov going to company filings and then typing in that company once you find their 10k read the business overview and try to get a sense for how this company makes money and how it's either going to stay stable or grow now after you figure out what the company is about number two you can start to look at the different company specific metrics like p e ratio enterprise value over ebitda the dividend payout ratio and also their dividend yield when you look at metrics like these the indicators aren't that helpful unless you actually compare to something else so unless you have some context so a common comparison that you can actually make is to look at the stocks industry group a benchmark index like the s p 500 or just compared to the historicals of that particular stock to do that you can use a stock screener website like finviz.com now in the beginning you might be a little bit lost but as you gain familiarity with the different stocks and their metrics you'll start to gain context on these indicators and be able to identify certain opportunities an important metric that i'd actually like to talk about is the dividend payout ratio since we're talking about dividend stocks and that's represented as total dividends paid divided by the company's net income so for example if a company gets 10 million dollars a year in profit and it pays out five million dollars a year in dividends that means they're paying out about 50 so a 50 dividend payout ratio means that the company is paying out half of their profits in dividends every single year the more a company pays to its shareholders the less they're actually reinvesting into their own business so that's actually a pro and a con of a dividend paying stock but ideally you want a business that's able to continually to pay out dividends and not hamper their growth while doing so the ideal dividend payout ratio is somewhere between 35 to 55 that's considered healthy now high is somewhere between 55 and 75 and very high is 75 to 95 so besides looking at those metrics number three you can also look at the track record for paying dividends so if we pull up dividend.com and search for a ticker say 3m which is tigger symbol mmm you can see a lot of data about 3m's dividend growth and history they've been paying dividends consecutively for over 59 years so you know that they're most likely going to continue to do so since it's basically built into their business model there are plenty of other stocks that do this as well and some that come to mind are coca-cola which also has 59 consecutive years of dividends and home depot which has over 26 consecutive years so now i want to show you guys my dividend portfolio so i'm gonna head over to my desk over there and share my screen alright guys so here's my dividend portfolio in spreadsheet format as you can see here it is quite a lot of extensive information but i felt like spreadsheet was a lot easier to read than fidelity now i will show you quickly that this spreadsheet basically reflects my fidelity account right here but we're going to be operating mostly with the spreadsheet today because my fidelity account has index funds holdings which aren't really that relevant and i feel like the fidelity interface is just a little bit more confusing now by the way if you do want to see everything i invest in that is available in my patreon which will be linked below but for today's video i'll only be showing you the dividend portfolio side of things okay so there is a lot going on so feel free to pause the screen at any point if you want to study all the holdings but let's talk about some of the notable holdings of this dividend portfolio my biggest source of dividends is actually coming from a t which is ticker symbol t which currently pays over a seven percent dividend yield admittedly i purchased this at 28.79 per share and clearly even though it pays around 400 of dividends every single year i'm actually down around let me see here 300 on this stock i believe yeah i'm down 297 dollars on the stock itself at the time of this recording now for dividend investing to be really magical we really are looking for companies that pay dividends while either remaining flat or even appreciating in value now you'll see one of my best winners here is actually american express i'm up 741 or 74 on it it also pays i think a one percent dividend uh point nine nine percent dividend yield on this stock now one percent isn't a lot and that's because its payout ratio is around 20 if we look on yahoo finance now american express's main purpose of this portfolio is that it just helps diversify the portfolio a little bit with a balance of growth along with dividends now a more true dividend stock here is something like craft heinz co which actually has a yield of 4.37 not only am i up i believe 245 dollars on this initial investment of thirty four hundred dollars but i can also expect around 160 dollars in dividends for craft heinz co per year now another source of dividends and growth is apple and admittedly i've been a pretty big bull on apple for quite a while now as you can see my cost per share of apple was 64 dollars a share so i acknowledge that this isn't the best reflection of a full dividend portfolio since apple is more of a stable growth stock but it still pays a dividend and that's why i'm keeping it in here it's because of apple that the profit and loss of this dividend portfolio is quite high as you can see it accounts for 22 000 of my 25 913 profit now if we were to remove apple we would actually get a more realistic view of what my dividend portfolio looks like so let's actually go do that right now let's actually delete apple from the portfolio itself and just see how the portfolio changes a little bit here by removing apple the total cost basis of this portfolio is now twenty four thousand 000 and the total current value is around 28k and you can see that this portfolio is up around 3 500 this year or 35.91 which is around 12 now i bought these stocks back in january with the exception of craft heinz co which i've been averaging into over time now with this portfolio removing apple i'm actually still receiving around a thousand dollars a year in dividends from this portfolio and this portfolio has been steady and consistent if i were to add my apple position back in my total dividends per year is actually 259 or right around 104 per month which is pretty cool so even if all the stocks were completely flat for the entire year i would still make around 104 per month and i didn't have to do anything about it but one thing i wanted to show you guys was actually this manage dividends button in the fidelity account if you click on this you'll actually see that for all of my dividend portfolio or all my dividend stocks on the left it says for dividends reinvest in security so what does that actually mean we're going to go through what reinvest in security means at my other desk so let's go right back there and let's get right into it when you get paid a dividend you can either have it be reinvested in the security automatically which means you're buying more shares of that stock with your anticipated dividend payments or you can just have it payout and cash to your account ideally you're choosing reinvest in security that means the next time you actually get a dividend payout it's actually going to go towards buying more shares so that when you have more shares your next dividend will be higher and then your next payout will be higher and the cycle basically continues so on and so on and so on this is commonly referred to as an automated reinvestment plan and this becomes super powerful the more time that you actually give it another name for this automated reinvestment plan is called drip and that actually stands for dividend reinvestment plan but the term drip is usually referring to a formal program offered by a publicly traded company if you have a brokerage account such as one with fidelity and you choose reinvest in that security you should automatically get access to any drips by public companies now the advantage here is that you may even receive new shares at a slight discount to its current market price to illustrate the power of dividend reinvestment i have these graphs right here and this is pretty crazy guys the reason why you would want a dividend portfolio let's say you put ten thousand dollars into home depot stock on january 1st 2000 and you held it for 20 years with dividends reinvested your total at the end of 20 years would be eighty eight thousand two hundred eighty four dollars now without dividends reinvested you would have a total of sixty six thousand one hundred and thirteen dollars this difference is twenty two thousand one hundred seventy one dollars over the course of twenty years which is pretty significant of course if you didn't reinvest the dividends you would have received the dividends as cash which means that that would have amounted to another 11.8 k so if you add that to the total value without reinvesting dividends the total of that is going to be 77 935 dollars that's still a total difference of over ten thousand dollars so it's always important to be reinvesting dividends in my opinion now you can either do this in a taxable account like the one that i have or a tax advantage account like the roth ira it is important to note that with reinvested dividends you're still paying taxes on those dividends because the irs still treats reinvested shares as cash so if you are starting a dividend portfolio consider doing it in a roth ira because this means you won't pay taxes on your gains or your reinvested dividends if you aren't sure of what a roth ira is or how to start one make sure to check out my videos on that i'll link them here and below in the description a roth ira is basically an individual retirement account that helps you shelter your gains against taxes all right so who are dividends actually good for there are some pros and cons to dividends now in terms of pros there are three that come to mind number one passive income and peace of mind i guess this is a two-parter but it's a true form of getting money into your pocket passively now if you do want to live off of dividends you'll need to have a really sizable portfolio as an example if you want to live off of fifty thousand dollars a year for example your total portfolio value would need to be around one to one point five million dollars at an overall yield of three to five percent per year my portfolio if you can see right here sits at right around 1.8 dividend yield per year and the way that i figured that out was i just basically divided my total dividends per year of 1259 by the total value of my stocks if i wanted to focus more on dividends i might be able to get between a three to five percent yield on my total current value and the way that i would do that is i would just redistribute the profits of apple into some higher dividend paying stocks but for now i'd rather just keep apple the way it is the second pros of dividend paying companies is compounded returns which i think we've already covered a lot with drip and number three dividends are a good hedge against inflation which we've already been experiencing a lot this year according to this article on nasdaq high dividend yielding stocks outpace inflation over the long term even in cases where inflation might seem to bury them for a few months or even years the high-yield stock will often win out in the long run so that's pretty cool if you own some dividend paying stocks you also get some protection against inflation which is pretty cool now there are some cons when it comes to investing in dividends number one you're mostly investing in large stable companies which can be good for some people but if you're seeking more growth and want higher returns for taking on higher risk dividend stocks are probably not what you're looking for i mean just look at the stock chart for home depot for the past five years it's pretty stable and has almost tripled in that time but if you compared that to a bigger growth stock like let's say netflix or a crazy growth stock like tesla in the past five years you would have had a much higher substantial return also if you are investing in only large stable companies you're not really as diversified as you could be with a balance of other types of stocks like foreign stocks small cap stocks mid cap stocks etc the second con is that the returns can actually be quite limited since a company is continually shelling out cash the underlying stock will have a natural type of friction when it comes to increasing their share price because it's not reinvesting in itself future dividend streams are taken into account when the market is pricing a stock so just keep this in mind the third con is that dividends aren't guaranteed companies can cut their dividend at any time so you do have to somewhat pay attention to the market and basically figure out what it's doing on a monthly or quarterly basis and dividend stocks aren't as passive as say index fund investing i will say though one of the nicest things about my portfolio is that i know i'm getting a consistent 100 per month and that's even at a low yield percentage overall now as always make sure to do your own research when it comes to dividend stocks don't just blindly go and copy my portfolio i'll link some great resources below so that you can figure out what types of stocks you may want to include in your own portfolio and also make sure to check out my patreon in case you are interested in seeing everything else i invested thanks for being here make sure to press the like button and subscribe to my channel and i hope to see you guys in the next video alright peace

Channel: Humphrey Yang

Views: 52,184

Keywords: humphreytalks, dividend investing, dividend portfolio, dividend stocks, stock portfolio, dividend investing portfolio, dividend growth investing portfolio, dividend investing strategy, best dividend portfolio, dividend portfolio update, dividend portfolio 2021, dividend portfolio for monthly income, passive income

Id: Tyi--DTMo3Q

Length: 12min 58sec (778 seconds)

Published: Sun Oct 03 2021