I can’t write this without smiling. 2016 is going to be an amazing, life-changing year for me and I cannot wait until the ball drops on New Year’s Eve to make it official. I’ll be marrying the love of my life at the end of May, so I don’t think there is a bad thing that can happen to me. Well, now I left myself with an impossible task. How on earth to I segue from that to discussing my 2015 investing goals? Nothing I do this year will mean more to mean than that. So I guess I will technically knock out one goal at the end of May? Anyway…. now I’ll get down to business. This article will discuss my 2016 goals!
The reason it has taken me this long to put together a goals article is because I have struggled with deciding how exactly I want to mold my 2016 goals. When I set my 2015 goals, which were definitely ambitious in hindsight (which is not at all a bad thing), I created three kinds of goals: investing, expense focused, and life goals. I’m not going to spoil my year-end goal review article too much here, but the one thing I learned from my 2015 goal review process is that I just did not have enough time to accomplish everything I wanted. It is unfortunate and a lot of it was self-induced, as I traded the slower season in public accounting for a new job that found me travelling and working more hours. And, ugh, well, we all know how that ended as I am not back at my original job. It is very funny how life works out though, right? These experiences were very influential for the next year as I have a wedding that will occupy a lot of my free time and expenses in the first half of the year. So if any of you are wondering why I am not including those goal categories, that’s why. Again, I couldn’t be happier and once again I am smiling as I write about getting married. But I want to focus my goals and push myself in the areas that I know can make a difference in 2016. Hopefully I didn’t turn down the ambition on my goals and instead just shifted my focus on getting the most bang for my buck in 2016! So here we go everyone, my 2016 goals are as follows!
- Projected Annual Dividend Income of $3,250- Currently, my projected dividend income is sitting around $2,500. I’m definitely not alone in what I am about to say, especially considering the great comments Lanny has received from one of his recent articles about KMI, but the dividend cut from KMI was really felt as I calculated this dollar amount for this goal. But after reading about the dividend cut, Lanny’s article, and a few others thoughts out there, it appears that Kinder and the rest of senior management made the right/tough decision that is best for the long-term health of the company. Do I like it…no…but I respect the heck out of them for making the decision that needed to be made. The KMI cut is officially in the past so now it is time to move on and start looking forward. It happened, oh well, let’s move on and earn back the income. With a goal of $3,250, my annual dividend income will need to increase $750 during the year. I arrived at this figure by making a few assumptions along the way about how I am going to receive increases in dividend income throughout the year.
- Dividend Re-Investment. My portfolio’s average yield is ~3.95% right now, so I will receive an additional $98 from re-invested dividend income based on my current annual dividend income of $2,500.
- 401(k) Contributions & Employer Match – Each paycheck I contributed ~$130 to VINIX, one of Vanguard’s standard S&P 500 mutual funds. The fund’s yield is about 1.75%, so I will receive ~$54 in forward income based on he 24 contributions I am set to make in 2015. In addition to contributions made during each paycheck, I will also receive an annual employer match contribution during the summer. Remember all of those who thought Lanny was crazy when he wrote earlier in the year about why an employer’s 401k match is huge news for dividend investors…well this is why. My match will be 50% of the contributions for about 8 months (since I rejoined the company in September and our fiscal year begins in April). If my calculations are correct, I should receive a match of ~$1,000 in the summer, which will add ~$17.50 in projected dividend income to my portfolio. When all is said and done, I should receive $71.50 in dividend income related to my 401k activity in 2016.
- Dividend Growth – Last year, my portfolio’s average dividend growth rate was ~7.5%. However, as Lanny pointed out in a recent article, we have noticed a trend of slowing dividend growth rates from many of the companies in our portfolio. While I haven’t calculated my portfolio’s weighted average dividend growth rate…yet….I am going to estimate that this amount has decreased from 7.5% to 5%. If you multiply my current dividend income by 5%, that represents a $125 increase from dividend growth.
- New Investments – After considering the three items above, I will need $455 from new investments to accomplish my goal. Based on the capital constraints resulting from my wedding this year and some of my others goals (see below), I should be able to get there. It’ll be a push, but I can definitely get there!
- Invest in 5 new Dividend Aristocrats in 2016– I’m not going to spend too much more time discussing KMI, but one of the takeaways from their dividend cut announcement is that we were all reminded that a dividend, let alone a dividend increase, is never guaranteed. Well, investing in companies that have demonstrated over a long period of time, aka Dividend Aristocrats, is the easiest way we can put ourselves in a position to see our dividend income increase versus taking a step back (again, I’m not guaranteeing this). Quite frankly, between KMI and ARCP I have had two major dividend cuts that have forced me to take an annoying step back in my forward dividend income. Surely, my dividend income goal would have been higher if the cuts would not have happened. And you know what, I am sick of it. I’m sick and tired of seeing my dividend income take a step back. One common thing with both companies is that they were not Aristocrats and their consecutive dividend increase streaks were well below the minimum 25 year threshold. With the wound still fresh, I want to change this nasty streak I have and continue to put myself in a position to see my income grow. Therefore, I want to challenge myself to add 5 new Dividend Aristocrats to my portfolio during the year. My focus is on building a strong, growing dividend income stream and I think this will definitely help. Time to go shopping at Target (Our most recent stock analysis) and based on my most recent Top 5 stock listing , and our listing of foundation stocks, which include plenty of great Aristocrats to choose from that I currently do not own.
- Invest in 2 Companies with Dividend Yields below 2%– Huh? What? How the heck am I going to earn $455 in dividend income from new investments if I invest in low yielding stocks. One of my objectives in 2016 is to build a stronger portfolio and dividend income stream, which is the objective every year quite frankly. The reality set in when I was reading Lanny’s Starbucks article and learning about how great of a company SBUX is…I am missing an entire population of great low yielding dividend stocks that offer some impressive dividend growth rates. I sometimes tend to ignore stocks with a low dividend yield (one criticism of our stock screener) because I am trying to find stocks with a yield greater than the market. If I want to build a diversified dividend investing portfolio, I can no longer continue to ignore this sector. Therefore, I am challenging myself to invest in two low yielding companies during the year. Over the years, our screeners and stock analyses have identified many great companies out there: Starbucks (see above), Disney, our Top 5 low dividend yield/high dividend growth rate stocks, and ABT from my Top 5 Dividend Aristocrat’s with a low debt to equity ratio article. There are plenty of fish in this see, I just need to cast a line. That hopefully will change in 2016.
- Invest $15,000 in New Capital in 2016 – This was my favorite goal in 2015 and I was able to knock it out in August due to the headwinds I was able to capture from changing jobs twice in a year. But I am not planning on changing jobs again this year unless my socks are knocked off (you never know though, right?) and I will have less capital available due to the wedding/honeymoon. So as a result, I will not increase the dollar amount threshold in 2016. In my projected dividend income goal above, I mentioned that I need $455 in projected dividend income from new purchases to achieve that goal. To hit this mark, I will need an average yield on new purchases of ~3.05%. This plays very well Goal #3 of finding 2 companies with yields below 2% to purchase in 2016.
- Earn $1,000 in Other Income – Another favorite goal from 2015; however, I was not as successful here as I was with the other goal. I tried several ventures for earning additional income throughout the year and man does it take a lot of time. Note, this does not include income from this website. As time became more precious for me, finding new ways to generate income was sacrificed and now it is really bothering me. I know I can do it if I stay more focused and keep on fighting through, so I want to take another stab at it. Lanny may be solving a major issue/annoyance he has had over the course of this blog (I’m not going to spoil it for you all) and his commitment to using online websites to generate additional income was a main driver for it. His primary source of online income is the website Swagbucks (here is a referral link for those who are not familiar with the website or you can click the banner on the right) and he has made a decent chunk from this fun website. I have dabbled and gone through periods of commitment and dry spells. However, if I can continue to sell stuff, use websites like Swagbucks regularly throughout the year, and earn cash back points on my credit card, I know that I can make at least $1,000 in other income. This one is on me to deliver, so it is time to step up to the freaking plate! LET’S GO!
- Learn One New Song on Piano– I’m not planning on sneaking out of this article without one life goal. For those of you who do not know, I played piano throughout my childhood. For 10 years, I practiced daily and by the end, I was a pretty good piano player. The hard part about playing piano at a high level is that you need to practice regularly to maintain you skills. Unless you are a prodigy, Mozart, Chopin (my favorite), or Beethoven, it is very, very difficult to just sit down and play a song flawlessly. I am nowhere close to their levels and I can’t believe I mentioned them in the same article. Periodically, I sit down, play piano, and leave disappointed realizing that my skills have diminished and my playing career is a shell of what it used to be. It is painful to listen and watch myself struggle through songs that I could play effortlessly. If any of you played piano, you probably know the feeling I am talking about. So after my wedding, I am planning on trying to re-vitalize and re-capture this skill from my earlier life. In my career, I had one nemesis of a song. A piece title Polonaise in A flat major op. 53 by Chopin. This song is my all time favorite classical piano piece and man is it difficult. In an earlier life and my peak piano playing days, I attempted to learn the song and it did not end well. The version below is 7 minutes long and lets just say it would take me over 30 minutes to “play and finish” the song if that’s what you call it. This may sound ridiculous, but what did me is the fact that I have smaller hands. However, I really want to start the process of teaching myself this song over again. It may take over a year and I am prepared for that. But I want 2016 to be the year that I begin re-building and re-learning this song. Heck, if I can play this song at a third of the speed that this guy can I would consider it a success! Maybe I’ll update you guys with a video or two throughout the year so you can judge my progress. By the way, it really pisses me off how effortlessly he plays this song.
So there we have it everyone. My 6 goals for 2016. I can’t wait for the year to end and start to work towards knocking these goals out. I’m focused and determined after the way 2015 ended. What are your thoughts on my goals? Would you invest in companies with a yield below 2%? Or is that too limiting of a target? Do you think my goals are ambitious enough or did I settle? Have you set your 2016 goals yet? If so, do we have any in common? Please everyone, let me know your thoughts, comments, or concerns!
Happy Holidays Everyone and Happy New Year! Can’t wait for 2016.
Disclaimer: I do not own the rights to the video included in this post.