I was reviewing my income received the other day for my dividend account and after realizing it is way too low I had a quick thought…should it matter when dividends are paid by the companies I am investing in? Should the payment date of the dividend actually come into consideration when choosing individual dividend stocks to invest in? As always with personal finance I think the answer is that it depends.
Should it matter when a Dividend payment is made?
In an unrelated article author Robert Laura provides his approach to dividend income through a laddered equity approach. The example he provides:
Like CDs, many blue-chip companies pay their dividends at different times, including quarterly and annually, as well as in different months. By strategically buying stocks with sequential dividend payments, investors can generate consistent income well above current CD rates and other packaged products. Take for example these three companies:
Jan – KMB
Feb – PG
Mar – JNJ
Apr – KMB
May – PG
Jun – JNJ
Jul – KMB
Aug – PG
Sep – JNJ
Oct – KMB
Nov – PG
Dec – JNJ
Assuming each company maintains their current dividend and payment date, they combine to provide a monthly paycheck throughout the year.
Using his system he would have a monthly “paycheck” which is a very interesting and attractive thing to have as a retiree and considering the 3 stocks he chose have a long history of dividend payments it should increase yearly (but as well all know nothing is guaranteed).
I could see this being an amazing tool for a retiree or near retiree looking for an income stream based on dividends, but right now I am still in the accumulation phase. As such, I don’t think planning today for when 40 year old’s Evan’s Dividends hit his bank account should take a higher priority then using all the metrics to determine when I pick up chunks of the dividend champion list.
Checking when My Dividends Are Paid
Just for kicks I took a quick look at my holdings to see when I get paid out:
- Jan –
- Feb – AFL, JNJ, MMM, PBI, WAG
- Mar – BDX, CB, CTL, LEG, NFG, SWK, VFC
- Apr –
- May – AFL, JNJ, MMM, PBI, WAG
- June – BDX, CB, CTL, LEG, NFG, SWK, VFC
- July –
- Aug – AFL, JNJ, MMM, PBI, WAG
- Sept – BDX, CB, CTL, LEG, NFG, SWK, VFC
- Oct –
- Nov – AFL, JNJ, MMM, PBI, WAG
- Dec – BDX, CB, CTL, LEG, NFG, SWK, VFC
Wow, I may have left some gaping holes of income for Future Evan, but he can deal with it then since present Evan was nice enough to set this thing up for him.
I definitely want to invest in things that pay dividends — that seems like a great way to get actual passive income!
For anyone with a normal salary, like myself, it is going to take YEARS to build…may want to think about starting sooner rather than later.
What a great idea! Figuring out when you get paid dividends and investing in other companies that will pay dividends on the other empty months.
I never thought to check what months I received my dividends in. In the end I don’t think it really matters much to me, since at the moment they are all reinvesting, but in the future having a month stream would be nice.
The only thing that monthly stream doesn’t take into account is the different amounts each company pays so you would still not necessarily have the same income each month. I guess you could adjust your level of investment in each company to even this out, but I think that is a little extreme.
Yeah, I haven’t really decided if this matters since it would be a supplemental to any earned income. That being said, any time things are consistent it is easier to plan around.
Never thought of this. I guess the pay date is very important if your relying on the dividend as your main source of income. But if your not, I wouldn’t even consider the pay date.
I think I may agree Joe…but later on in life it might matter more, but I can’t imagine it would to an extent that I should today’s investments around it.
I don’t even see why it should matter in retirement when companies pay dividends. I will be moving chunks of money on a quarterly or semi-annual basis and going from there. You will still want some liquidity anyway so who cares when a company pays a dividend.