How do you get to the point where you can live off dividend income? Of course, your lifestyle is important but the longer you invest, the more your money will grow.
The key is to own Perpetual Dividend Raisers. Perpetual Dividend Raisers are stocks that raise their dividends every year. And this is how it works:
If you invest $100,000 in a portfolio with a starting yield of 4%, dividends growing at an 8% annual rate and stocks performing in line with the S&P 500 historical average,
– after 10 years, your investment would be worth $229,032 and had earned you $7,996 in annual dividends.
– after 20 years, your investment would be worth $524,559 and your annual dividends would be $17,262.
– after 30-years, your investment would be worth 1,201,414 and generate $37,269 in annual dividends.
But your investment looks even much better when you automatically reinvest all the dividends. And the reason is very simple: You buy more shares and generate more dividends to buy more shares and generate even more dividends!
These are the numbers when you automatically reinvest:
– after 10 years of reinvesting, you would have $334,911 earning $11,588 in annual dividends.
– after 20-year, you would have $1,097,596 in your account and the income generated totals $35,824.
– after 30 years of reinvesting, you’d be sitting on $3,524,108, nearly triple the $1,201,414 you would have if you did not reinvest. And you had be collecting $107,572 per year in dividends on an original investment of $100,000.
There is another advantage that you should keep in mind. You can stop reinvesting dividends anytime you need and start taking them as income. So, if you are reinvesting dividends, your financial situation changes and you need the cash flow from your dividends, simply stop reinvesting and start collecting the dividends.
The best part about living off your dividends is, you never have to touch the principal because your investment pays enough income every year to live on.
Sven Franssen