Fun with Dick (Roth) and Jane (401k)

I was going to lament how much I miss the Trump stock market (bad news tweet = buying opportunity, good news tweet=back to normal), but last night I had a flash of brilliance. 

 I have more disposable income now than I have ever had in my life, but still not enough to retire. So I was looking to see other ways to increase income. My employer recently started matching 401k contributions, and last year they did an introductory 2:1 match for a year, which I participated in for a pre-tax account, but this year when it converted to 1:1 I stopped contributions altogether. Now I know many of you are saying "But it's free money! Why would you do something stupid like that!" Well, it *is* free money, but I make more money using my after tax money on dividend growth stocks (and in the long run) than I do from a managed pre-tax 401k (ETF-only no dividend) institution, that's why. Remember, I'm not the genetically healthiest person around, I don't plan to live forever like my 401k and social security accounts think I will. Then I started wondering - can I get my employer to match, then just take the money out? No I can't, unless I claim hardship, which I have nothing to back that claim up with if I'm making enough from dividends. Then I saw something interesting: My employer also matches Roth contributions:

Uhm, wow. Because, this:

See where I'm going here? But then you ask, "What happens to the money your employer matched (and any gains on both contributions) when you take that money out?"

So, to summarize: I give my 401k instituion 5% of my paycheck to deposit into a Roth 401k, my employer matches that 5%, then I remove that contribution whenever (say, 2 weeks later), invest in my dividend stocks, my 401k instution takes that matching amount (and any gains) and puts it into a traditional 401k account (since it is pre-tax) and I let it sit until I retire and take that matching amount out (sooner with penalties, later without). Simple, right? No, of course not, not when it comes to institutions. I have been struggling with the institution my employer uses since day 1. When I leave my employer, I can't wait to roll that money into my own IRA, or even better a ROBS . 

 So I called my institution, and of course I was sent up the chain with my "complicated" question. After stating this was recorded, and restating my name (ever feel like you are being set up for a court hearing?), I received an explanation which made no sense. "So let me get this straight, I allocate $5k to my Roth 401k, my employer matches $5k, and I can only take out $600, $100 of which will be taxed as though it was earned." What??? I laughed inside as this guy started to go into his pitch of getting me invested for much more, to which I reply I'll likely be dying before I'm 65, so what's the point? He never missed a beat, and kept going with his spiel without an ounce of empathy. 

 Finally, I did get him to show me where the plan information is, and all I could find out about what he was talking about was this: 

"You are always 100% vested in your contributions and any rollovers made to your 401(k) Savings Plan account. You are also 100% vested in any 401(k) match contributed by (Employer)." 

and 

"Excess contributions of Roth contributions are distributed tax-free, but earnings are taxable. If you made both Roth and pre-tax contributions to the 401(k) Savings Plan in excess of the IRS Annual Contribution Limit during the calendar year, excess contributions will be taken from the pre-tax source first followed by the Roth source. Please note: return of Roth and/or pre-tax contributions could result in the forfeiture of associated matching." 

Which makes sense if it only works with excess contributions (Roth limitations). So, after all this inconclusive information, I went ahead and decided to match 5% of my income into a Roth 401k. I really have nothing to lose, if I can't touch it until I'm 65, then I guess I'll be getting it then (or my kids will). Or I'll just take it out with a 10% penalty, but doubled money (the only reason I might stay in it).  

But, right after it goes in, I will see if I can remove my contribution and see what happens. If the employee match stays, then I'll keep adding and removing, magically making free money for when I'm 65 appear, and keeping my after-tax income. If the match doesn't stay, or they won't give me my money back, then I will simply turn off the feature, and continue as normal, waiting for this boring market to bubble and crash so I can add more dividends. There's a good chance this might happen in September, when the stay of execution for people not paying mortgages and rents will come due...

Dividend Increases & Special Payouts

• Qualcomm Incorporated (NASDAQ:QCOM) has approved a 5% increase in the Company's quarterly cash dividend.  The quarterly cash dividend will increase from $0.65 to $0.68 per share and will be effective for quarterly dividends payable after March 25, 2021.  This one has been really growing in value, too.  I picked a winner.
• Realty Income (NYSE:O) declares $0.235/share monthly dividend, 0.2% increase from prior dividend of $0.2345.  Just a hair, but I'll take whatever I can from REITs after the lockdowns.

March Purchases:

Rotations

The stock market is kind of a crystal ball. It prices itself based on what the majority of investors and traders *think* is going to happen. Now that vaccinations are up and cases are down, money is leaving tech/entertainment (and others) and rotating into energy/travel (and others). I haven't noticed too much rotation out of consumer staples... yet. While I don't expect any shocking changes to this path (the establishment is back in power), if any happen I'll try to buy up what I can while blood is in the streets. 

 I think much of this "reading of the future" is also the expectation of a democratic congress passing another bailout bill, and a possible positive jobs market report-which should be only natural as everyone goes back to work. 

 The housing market is starting to bother me a bit. We are definitely seeing a bubble, and rentals/leases are going to have to have a day of reckoning soon. I'm glad I bought my latest house when I did, as it has gone up 20% in only two years, but I don't know if I can expect it to maintain that much longer, or even continue to increase. Not that it matters, I don't plan on selling - I expect this to be my last home before the old folks home!

Big homes require more upkeep than I'm willing to expend energy or money on. But I digress... 

 I have hit another benchmark, attaining over $700 a month in dividends ($711). The benchmarks are still slow, but happening sooner. I still remember hitting $600 a month. Meanwhile I am finishing up getting my home ready for retirement in under 4 years, while putting everything else in dividend stocks. Bills that I can pay ahead are paid to the end of the year, which helps, and no debt whatsoever. I have found that having a nice chunk of cash on hand to "borrow" from myself is quite helpful. Not only can I get large ticket items last minute, but I can also take advantage of a crash when it happens. I'm not quite sure what the magic number is to have on hand, but I think having enough for a quick small car purchase is best (low 5 digits). 

Government checks have been amazing for the market, and for my personal retirement prep. I am not a fan of them, as inflation is a shadow looming over the USA, and only a fool would stick it in a savings account or mattress. The best way to keep up with, and ahead of inflation are dividend stocks, as they are usually raising their dividends on par with, or ahead of inflation. At the same time the effect on the dollar is reflected in share prices. So make your money work for you... Don't sit on it, don't buy a depreciating asset with it (like a car - Uber instead). 

 So my advice is this: If you *need* something (food/home/transportation) get it. Then, if you have debt, pay it off! If you need a vacation, make it cheap (RoI)! Next, invest it. Appreciating asset, small business (things are about to open up), growth stock, or best of all, a dividend stock. And if you are so rich and retired, then gamble on crypto, meme stocks, or Vegas, but I wouldn't do those, even if I was rich and retired. There's so many ways you can give back instead. 

Dividend Increases & Special Payouts

• Xcel Energy (NASDAQ:XEL) declares $0.4575/share quarterly dividend, 6.4% increase from prior dividend of $0.4300. Boom!
• Home Depot (NYSE:HD) declares $1.65/share quarterly dividend, 10% increase from prior dividend of $1.50. Boom!x2
• Old Republic (NYSE:ORI) declares $0.22/share quarterly dividend, 4.8% increase from prior dividend of $0.21. Nice!
• Watsco (NYSE:WSO) will raise its dividend by 10% to $7.80/share!

February Purchases:

HD 13

OKE 6 

WTRG 15

XEL 10

ABBV 3 

MCD 2 

WEC 5 

APD 3 

IP 55

JNJ 4 

HRL 6 

Wall St. History

 The retail investor takes over the internet!

While you may be sick of hearing about it, I am posting about it here to keep it as a record of Wall St. history.  This past week, a reddit forum, WallStreetBets, got together and decided to buy a stock that some hedge funds had communicated that they shorted.  The stock was Gamestop initially, then it bled into others.  This put the pressure on the shorts to buy to cover, and to sell some oversold stocks to cover.  This is how it affected me, as stocks such as Target, Mastercard, and a few others that I own, had some buying opportunities (sometimes 5% drops on sale!).  Many of my friends wanted an explanation on what happened, and I ended up re-watching "The Big Short" with one of them, which is a great film for understanding what happened in the 2007 housing crisis, and what shorting a stock is.  I recommend watching it with Vidangel (a private company that I own stock in!) filters, due to adult language/content.

So, how did this affect me?  I was able to buy several of my stocks, and most notably Mastercard, on sale.  I have not been able to buy Mastercard since the inception of my dividend growth investment (DGI) account.  This is because Mastercard grew so fast, and I didn't have the disposable income I have now to catch it.  Mastercard quickly doubled in value since I bought it.  While it is still quite expensive and has a poor yield, it is easily my most reliable capital gain stock, and they have a good record of dividend growth.  I figure if I am ever in financial jeopardy, Mastercard will be the first to go.

I had bought my son some SPCE (Virgin Galactic) a year ago for a Christmas present for this past December.  It mostly went down after I bought it (it's not SpaceX after all).  It was also on the list of stocks targeted by retail investors as being shorted.  I told him to sell it - and he did for over double what it was paid for.  Carpe Diem, eh?  If he wants it back, he can wait until the short squeeze is over, then buy it back for probably less than I paid for it.  He seems to be more interested in buying a dividend stock, however.  

As of this writing, the reddit investors are "holding the line" until the shorts get squeezed.  I am not sure if they know when this will happen (depends on the contracts and their risk tolerance), but when it does, it will drive the price through the roof.  And very possibly cause a slight crash on the more stable company stocks as they sell to cover.  Good times.

Most of my companies showed a profit in the Q4 earnings, with the exception of Chevron, which had their first loss since 2016.  Chevron and Okeo are having a hard time with the Biden administration, which is not oil friendly.  A colleague who bought Okeo after the crash is thinking of selling.  I have a harder choice, since I would post a loss.  It would be quite a loss, but I would definitely be close to my tax harvesting limit of -$3k.  

Dividend Increases & Special Payouts

• Fastenal (NASDAQ:FAST) declares $0.28/share quarterly dividend, 12% increase from prior dividend of $0.25. Very nice, for an industrial parts vending machine company that was predicted to die thanks to Amazon.
• Kimberly-Clark (NYSE:KMB) declares $1.14/share quarterly dividend, 6.5% increase from prior dividend of $1.07.  Thanks, toilet paper!
• Archer-Daniels-Midland (NYSE:ADM) declares $0.37/share quarterly dividend, 2.8% increase from prior dividend of $0.36.  China has been buying a lot of corn!
• Air Products and Chemicals (NYSE:APD) declares $1.50/share quarterly dividend, 11.9% increase from prior dividend of $1.34.  Very nice increase.

January Purchases:

JNJ	4
HRL	18
ADM	3
APD	4
MA	7
ORI	172
CVX	4
FAST	4
XEL	4
IP	5
WTRG	6
SO	4
O	16
GIS	2
T	4
WEC	3
MCD	2

HEY ABBOTT!! Merry Christmas! Busy month for the portfolio!

LOTS OF STUFF HAPPENING!  WOW, just got my highest dividend raise ever this month!  Abbott Labs raised their dividend a WHOPPING 25%  I can't imagine getting a raise like that at my current job!  While I don't own as much Abbott as I would like (it is very expensive), I'll take it nonetheless!  I can only assume this will continue next year, since what Abbott makes everyone wants right now.  If they can also make a covid home test, this would really boost profits. 

Old Republic (ORI) also announced a special $1 per share special dividend for the third year in a row!  While I don't consider this a part of the dependable income, I do know they did it after Trump removed several regulations which benefitted ORI greatly.  It would be great if they can keep it going, since it is greater than their dividend normally.  My son was thrilled since he bought it a week before they announced it.  You can see below I did some heavy buying this month, not of ORI, but I do intend to do a large purchase of it soon, hopefully before the cutoff for the special dividend.   

While 2020 was a bad year for some, it presented unprecedented financial opportunities for all who could take advantage of them.  I truly feel blessed to continue receiving income which I can then redirect to my retirement.  I am grateful for my secure, well paying job, and the opportunity to keep bringing home the bacon and putting bread on the table, while also setting up my retirement income.  The stock market ended on a very high note, and I do expect some correction soon, but as with anything, nobody knows for sure when.  Especially with all the young money entering the market.  All you can do is tell when it is "close".  Euphoria is the key to look out for, and that is what I am starting to see.  I posted this once before, but it bears reposting to remind me to wait for the Euphoria cycle to end before buying much.

I would also like to comment on Warner Bros. decision to stream since I am an AT&T stockholder (who owns Time/Warner).  I am all for it, and I know this is not a popular decision with Hollywood and the movie theaters.  However, I think it can be profitable for AT&T and Disney should they decided to do it.  There is much money wasted on the way to the theater, and apparently eats up a good chunk of the cost to make a movie.  I personally would prefer to make my superior garlic parmesan popcorn, pause it when I like (bio breaks), and customize my own sound system all while laying on a comfortable couch with no fear of disease, sticky floors, or other people talking.  I understand the key to jobs is layers, but from a user standpoint, it is more economical and fun.  Again, my opinion.  While I am not a fan of the DC universe, I hope Wonder Woman does well.  I do look forward to the new Dune movies, and will probably pay for HBOMAX (owned by AT&T) when Dune comes out.  I did some heavy buying of AT&T (T) because this is a visionary and bold move, and that is what makes money.  Now if they could only shut down CNN...

Dividend Increases & Special Payouts

• WEC Energy (NYSE:WEC) declares $0.6775/share quarterly dividend, 7.1% increase from prior dividend of $0.6325.
• Mastercard (NYSE:MA) declares $0.44/share quarterly dividend, 10% increase from prior dividend of $0.40.  (Nice, but their $6B buyback will help guarantee shareholders more dividend safety!)
• W. P. Carey (NYSE:WPC) declares $1.046/share quarterly dividend, 0.2% increase from prior dividend of $1.044.  (Small, but typical of REITs, multiple small increases, and one large increase each year)
• Abbott Laboratories (NYSE:ABT) declares $0.45/share quarterly dividend, 25% increase from prior dividend of $0.36.  (Woohoo!)
• Old Republic (NYSE:ORI) declares $1.00/share special dividend. (Nice Christmas bonus!)

 December Purchases:

Thankful for November Growth

Many unpredictable factors occurring as of this writing:

- Election is over and pro-business candidate lost.

- Covid vaccine claims are popping up with high percentages of effectiveness.

- War is brewing in the Middle East

- Covid cases are spiking and hospitalizations are at an all-time high.

- Families defy warnings during Thanksgiving.

- Black Friday IRL is dead, Cyber shopping is booming.

These are variables with unpredictable long-term outcomes, yet the market is optimistic.  I wish I could explain that, but I cannot.  It can't be because gamblers are stuck at home so they play the market.  Nor because Biden is set to roll back several pro-business regulation removals, that wouldn't make sense.  I know there is a lot of young money in the market, but I can't see how that accounts for anything.  Lack of jobs or people willing to fill them which damages tax income and social security income.  Also the old and infirm are dying which is helpful for the state of social security from an economic standpoint.  These deaths also are taxing to life insurance companies, but are positive for people set to inherit money from their relatives.  Government is set to swoop down on estates not legally protected.  Covid related deaths are set to peak in mid-January, which means further delays to education and some businesses.  I could go on and on with all the variables that add more uncertainty, but I won't.  The point is that no one knows what will happen next.  

As I write this, we have locked down our household.  Our church has been affected by Covid, my work is a ghost town with everyone working from home (myself included part of the week).  My wife's friends have contracted it, and thankfully she hasn't seen them for a few months.  Our annual vacation was cancelled, and we are thinking of buying a few more Oculuses to have a virtual vacation.  Not much to do but watch Kitboga on Twitch and play the market.  Crime seems to be increasing locally, a logical outcome of a hurting economy.  But I digress... the market is predicting that everyone will live happily ever after.  This makes it somewhat difficult to find bargains, but I'm buying when I can.

The ongoing drama of Chevron and Okeo:  Both companies seem to be improving, without cutting dividends.  I actually bought some Chevron recently because I feel more confident.  Hormel recently dropped after poor earnings so I swooped in and bought some up.  I also virtually toured the Spam museum on Zoom.  

As I look back on these words I write, I can't help but think how bizarre the world is currently.

Dividend Increases & Special Payouts

Fastenal (NASDAQ:FAST) declares $0.40/share special dividend. Nice!

Hormel Foods (NYSE:HRL) declares $0.245/share quarterly dividend, 5.4% increase from prior dividend of $0.2325.  Not bad!

November Purchases:

CVX: 3

JNJ: 5

XEL: 9

HRL: 13

ORI: 47

As Evie once sang:  "Be thankful for the good things that you got.  The good things that you got, are for many just a dream.  So be thankful for the good things that you got."

A Scary Earnings Month...

 Some good news, but mostly bad :)  The main thing was my net worth went from a record high, to lower than last month.  It dropped a LOT.  There was some good news though:

OKE and CVX did NOT cut their dividends.  This is huge, this tells investors such as myself that these big boys consider 2020 to be a blip, and they will continue next year business as usual.  That doesn't mean the dividend won't be frozen, but there is now a light at the end of the tunnel.

ABBV increased their dividend by 10%  This is a
big deal for me, because I did not do much investing this month.  I paid down some debt, and the way my paychecks were timed this month, I didn't get too much cash in the brokerage account.  This will change next month, however.  In summary, my monthly income went up more than expected thanks to ABBV.

This has been a fascinating month to watch the market.  China related stocks went up on the news Biden is winning in the polls, then everything took a dive on the 30th.  I'm guessing the big money is removing their cash in preparation for any election fallout.  Whomever gets elected, there will be a drop in certain stocks, while others will gain, but different for each candidate.  Either way I will try to maneuver through it.  I feel more confident in a Trump economy (I will miss those buying opportunity tweets), but there will always be different opportunities.  Of course, energy giants like CVX and OKE might be hurt again by a Biden presidency.  

Dividend Increases & Special Payouts

McDonald's (NYSE:MCD) declares $1.29/share quarterly dividend, 3% increase from prior dividend of $1.25. (That's a relief!)

AbbVie (NYSE:ABBV) declares $1.30/share quarterly dividend, 10.2% increase from prior dividend of $1.18.  (Still a good yield to buy today)

October Purchases:

WPC - 6 (that's all, folks)

Welcome to my passive income blog

I am about a week late, but I did save all the data on the last day of the month.  Biggest news is General Mills unfroze their dividend and raised it!!  I never thought I'd see the day! 😁

I'm not very inspired this month, and there isn't really anything in particular to say, with the election inching closer and no perceptible impact on the market.  I've been pretty busy getting back into the swing of things post-pandemic, and preoccupied with some life events.  So I'll just reiterate what I'm doing and why I'm doing it, something I haven't done for awhile.

My dividend investing began back in 2017.  I thought to myself, "I'm a halfway intelligent person, how come I can't make any real money in the stock market?"  I made some good calls, and some bad ones, but every time I invested, I had to wait a long time and hope for a profit.  I wanted a sure thing, something I could depend on, and live on without much time investment and stress.  

Prior to this, each paycheck I had excess cash, and I found that my wife and I were starting to buy things that we really did not need.  Henry David Thoreau's mantra of "Simplify, simplify" kept resonating in my brain.  I realized that in about 8 years I would be eligible for retirement.  While I had no debt (house had been paid off a few years before), I did not think I would be able to retire early, even though my employer offered this option.  As the first of my name to obtain a secondary education, and being blessed with being raised to be frugal but not stingy, I wanted to be able to "make it happen".  Why can't I retire early, as some are able to do, and then pursue some personal goals?

My job had proven itself to be as stable as can be compared to many.  So I just needed to increase my cash flow and invest it in my future.  I could have gone all in with 401k, and I did for a few years, but I did not like the choices that were given to me, and the fact that even if I retired early, I wouldn't be able to touch the money until I am 65.  After all, it was *my* money.  On top of that, my employer didn't even match it.  So how could I live off of it?  I stopped giving to my 401k at this time.

So I did the one thing every bank and insurance company has done for decades, bought high quality dividend stocks.  I took my initial stock account value (about 4k), borrowed 16k from my 401k (which *doesn't* allow me to reap dividends), and dropped 20k into about 10 stocks recommended for dividends.  And I was off to the races!  Best part about it was I didn't have to worry about these stocks breaking me.  General Mills, for example, has paid out their dividend for over 100 years.  They haven't always increased it, but they never decreased it.  That is something you can bank on.

Following this, I decided to take Thoreau up on his simplification of life, and started eliminating excess.  This was not difficult for me, as I am a minimalist by nature, but my wife is a hoarder, and even today she is still working on eliminating her accumulation of material items.  I basically took the view of, if I don't plan to use it in the next 6 months, get rid of it.  Our donations to the Salvation Army have been epic, and I'm still surprised I haven't been audited yet.  We continued this thinking by going down to one car (I use rideshare to commute to work, when I don't telecommute), getting a modest condo instead of a huge house (less upkeep, and kids are graduating soon), and eliminating time wasters.  When you have too many things, and not enough time to do them, then you don't need those things.  Right now we are preparing for retirement.  Fixing up the condo to our liking so we don't need to spend a lot of money later, obtaining large appliances, but delaying as much as possible until the retirement date, so they last longer, and taking every cent we save and putting it into dividend stocks.

Three and a half years later, I am making over $600 a month in passive income, which I reinvest, along with spare cash from my paycheck.  My employer also recently started matching my 401k, so I am giving the minimum for matching.  Once I retire, I can move my 401k to an IRA and live off the dividends on stocks *I* get to choose.  That is my bigger asset.  I calculate that with the IRA dividends, and my capital investment dividends, I could make over $2k a month if I retired *today*.  

Sadly, I can't retire today, but I can in 4 years.  While $2k a month before taxes is a modest amount, I would like to double it in 4 years, if possible.  Once retired, I can draw on the dividend cash to pay my bills, and the dividends should increase annually ahead of inflation to more and more every year.  Any windfalls I receive, I would use to add to that, and I would monitor the companies that may take a wrong turn, cash them out, then reinvest in another dividend company.  Then, when we pass on to the next life, my kids should be able to split the accumulation down the middle and live off the dividends as well, and hopefully, if they are wise, will pass it down to their kids, and so on.  Trying to leave a financial legacy, so that way if they are artists or missionaries, they won't need to worry about income.

Financial independence and freedom is the end result.  To be able to pursue other projects and endeavors without worrying about paying the electric bill or being able to get your next meal.  Set up my own schedule, say no to something I don't believe in, support or do the things I do believe in without pressure, care for people, and provide opportunities for others than myself.  As a great man once said:  "Without money, one often has to do things one does not want just to survive, and this is not how I want to live."  Money is a tool lent to us, being a good steward of it and not wasting it is the legacy I want to leave.

Dividend Increases & Special Payouts

Realty Income (NYSE:O) declares $0.234/share monthly dividend, 0.2% increase from prior dividend of $0.2335. (another one of their minor increases, but any increase is good for real estate at this time).

General Mills (NYSE:GIS) declares $0.51/share quarterly dividend, 4.1% increase from prior dividend of $0.49. (Soon after I first bought them, they froze their dividend, but now they raised it!!  Patience has paid off!)

(October preview, McDonald's raised their dividend!!!!)

September Purchases:

T - 10

WPC - 9

WTRG - 15

SO - 4

ORI - 30

See you next month!