Dividend investing is one of my all time favourite topics to talk about. Dividend investing is something I’m so passionate about! It can be a simple way of building wealth plus creating an additional income stream that you can use for whatever you like. Being a dividend investor means that you are creating passive income, purely by being an investor.
So, what is dividend investing?
Put simply, dividend investing is where you invest in a stock or a fund that pays out dividends. It’s so simple! Think of it as getting an additional pay check but not having to do anything for it. You, as a share holder, are entitled to a part of the company profits. That is what the dividends are. The more you hold in companies that pay dividends, the more you can potentially earn.
Why I’m a dividend investor.
The main reason for why I am a dividend investor is for our early retirement plan. Being a dividend investor means that I will be able to create that income stream that will enable us to retire early. If that isn’t enough motivation, the fact that it will be entirely passive is. I don’t need to do anything active to be paid dividends; they arrive in my investment ISA on a monthly basis.
Furthermore, by being a dividend investor I will eventually replace my actively earned income. That’s when the tipping point is. Once the balance tips into that favour, then I can think about potentially finishing employment and embarking on a new journey. At the moment, the goal is to have £1,000 a month in dividend income received. I am a long way off this, but there is still a long way to go. Imagine getting £1,000 a month for doing nothing?
For our early retirement journey, the budget will eventually consist of two things. These are:
- dividend income
- growth in value of stocks – capital gains
The combination of these two things will enable us a fairly comfortable early retirement budget. I share in this video what the sums will look like but I can tell you that it won’t be over the top. I like simple living and intend to live my life that way 🙂 I don’t need fancy things! Though my sinking fund for a Mulberry purse might suggest something different…
Where do these dividends get paid?
I have my stocks and shares ISA with Hargreaves Lansdown and I’m very happy with the service. As it’s within that tax wrapper, I pay no tax on my dividend income. Currently, whenever I get divendend income, it is reinvested. That is the beauty of it! I receive dividend income and those dividends enable us to buy more stocks, which they pay us more. That’s how I am growing our income for the long term. It’s an exciting process and it is great to watch it grow over time.
In this post here, you can see the update for 2020, which was rocky in places. It should be better by the end of 2021.
How can you do this?
It’s so simple; you need to open an investment account – like a stocks and shares ISA with HL – and then invest in companies or funds that pay dividends. In this video I share our early retirement portfolio so you can see what I am invested it. Then, you need to be patient. Soon enough, you will start to receive dividend income. It will grow from there but it is a slow and steady journey. It’s not a get rich quick scheme, unless you have a lot of money to invest up front.
So this, in a nutshell, is why I’m a dividend investor. Onwards and upwards – the next five years should be exciting in terms of growth.
Have you invested in any dividend paying stocks? Thanks for reading!
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Have you considered switching to a commission free broker like Freetrade, Trading212 etc?
Seems like you’d have more money to invest with paying less fees and fractional shares of US stocks could help you out too
I have experimental portfolios with both Freetrade and Trading212 🙂
Hi great post. Dividends are superb. Yea trade free sites like Trading 212, less costly than HL who charge for each trade. Have you considered switching.
I have experimental portfolios with both Freetrade and Trading212. For now, I’m happy keeping my ISA with HL 🙂
Hello from Australia.
I love dividends (my wife has recently retired on her dividend portfolio) and always take the time to look for shares that have paid increasing dividends year on year and maintain a strong balance sheet.
I would rather a smaller portfolio of shares or funds that pay steady dividends come rain hail and shine – dividend growth investing if you will.
I’m happy to have discovered you.