Hey everyone! Every month, we live in a world that we pay for our expenses on a typical monthly basis. Most people budget monthly based on their food, shelter, car and other entertainment or daily needs. You know what I personally love about my bills? If something else is paying them for me! One fun way and reason to invest into dividend paying stocks, is to almost view them as a way to build up an asset that pays these bills for you! What do I mean? Let’s check it out.
Paying the Bills
We all have our monthly expenses that are typical. I wrote about some of my monthly bills a few months back, as a way to update where I stand on how much money goes out the door and how much of my dividend income makes up that. A way to have fun with buying a dividend stock is to see how much of that stock you can buy in that particular expense category, where the dividend stream ends up paying your bill! What are a few examples of what I am talking about? I’ll break them down below:
- The Mortgage – We all love this one and there is a great big group of us that is currently paying them down.
- Internet & Cable – As much as it makes me cringe to say this – I know there are SO many people that have cable still, even though everyone knows I haven’t had cable in over 5 years! However – I do have internet, with more recently me switching providers to have better service and a lower bill, a win win.
- Food – Do we need to eat? Yep. Haha.
- Transportation – Most of us have a vehicle that we use to get from Point A to Point B, sometimes to Point C, D & E, all in a day. Oh and using gas to fill up at the tank : )
- Insurance – Home, Auto, Life, etc.. you name it – most of us have this type of expense on a monthly basis
- Phone Bill – similar to internet/cable – quite a few of us use a mobile phone and have that as a monthly expense
- Public Utilities – Water, Electric and Gas – here we go!
Why am I writing all of these? Well, I am going to go down each one and I can use my life as an example, to talk about how much is being spent and what we can invest into to have our army of dividend paying stocks go to battle for us to pay those bills! This also makes it a little more fun to invest. Ready to dive in and start swinging down each one? I am, let’s do it.
Dividend Paying Stocks to Pay the Bills
- The Mortgage – Okay, so you have a mortgage, mine without property tax and house insurance is roughly $447 per month. My bank no longer exists, but we can use Wells Fargo (WFC) as an example. Obviously $447 per month is quite a bit, as that is annualized out to $5,364, ouch. This one is going to take a LOT of shares into Wells Fargo – One would need 3,529 shares! Now, I am not going to go out and recommend dumping all of your assets into owning this many shares, BUT you can initiate a position and slowly build this over time. One would need to invest over $170,000 into Wells Fargo to have this pay off your bill monthly, something that we may need help from Warren Buffet over haha.
- Internet & Cable – This one is a little more tolerable. One could have Time Warner (TWC) or AT&T (T). I used to have AT&T, but recently switched to a local provider. My annual expense is $300 or $25 per month. With AT&T’s dividend at $1.92 per year, you would have to own 156 shares of them, which just so happens I do. Therefore, as of the recent close price, you you need approximately $6.4K invested into AT&T to pay your internet bill, not too bad to have someone pay the bill for you, every single month.
- Food – there are plenty of places to go grocery shopping – Whole Foods (WFM), Kroger (KR), Walmart (WMT) or even Target (TGT). Now, I’m one person living in my house, so I spend about $60 per month or an annualized $720. Now I love Target, so one would need 300 whopping shares! I own 81, so not impossible, but one can get there in time. One would need around $21K in today’s dollars to own that many shares. Through DRIP and increases in dividends, it can be easier.
- Transportation – I sadly have an Auto Loan with Wells Fargo (WFC) and it kills me at $284 per month or $3,408 per year aka – we need a crap ton of shares here. But maybe I can focus on gas? Obviously you can always decrease the amount you drive, which I need to be better at. I spend about $100 per month in gas or $1,200 per year. I currently own two oil companies Shell (RDS) and TOTAL (TOT). They currently produce $510 annually in dividends currently, so I’m 42.5% there. With the downturn in oil & gas, and these two oil beasts haven’t really decreased their dividend – one would need almost an additional $9K invested, spread between the two. The full position, then, would pay for gas usage on a monthly basis. I’m almost there!!
- Insurance – ah, insurance. With House and auto insurance, I pay $1,430 per year in insurance costs on these two. I own Aflac (AFL), but there are other investments out there one can own. Aflac pays $1.64 per year and one would need 872 shares currently. I own about 106 shares and am just over 12% there.
- Phone Bill – Another fun one. I recently left Big Red i.e. Verizon (VZ) and pay around $25-$30 per month. Let’s say an average cell bill is $50 per month or $600 annualized. One would need either 312 shares of AT&T to pay for your mobile phone provider or 265 shares of Verizion. Can you do it? I need to definitely add more to AT&T (T) when the time comes to start eating away at this monthly bill.
- Public Utilities – Here we go. Electricity I have is provided by FirstEnergy (FE), gas provided by Dominion (D) and then Cleveland’s water. Typically this all currently runs me at $75/month. That is an annualized amount of $900 big ones. Currently I own National Grid (NGG) and my Akron based FirstENergy (FE) and is providing me with $225/year. I am still $675 off with the yield on average between the two companies at 4.77%, I would need to invest an additional $14K into them! One could do it, but may take some time. And as stated earlier – dividend reinvestment (DRIP) will help out along the way, as new shares from reinvestment will chip away at this total.
Div Stocks to pay the bills summary
All in all, the goal here is to demonstrate that there is a point to saving and investing, such as paying your bills! You can make it a fun journey by focusing on each bill at a time and building that position with the right valuations. A great example would be Target (TGT). Target currently has a 2.7% weight in my overall portfolio and I wouldn’t mind, at it’s current price, adding more shares here. Also, if AT&T (T) drops in price to the upper $30’s, then I’ll be more inclined to add more shares. One can do this with all sorts of bills and mix in different companies as well. What is interesting is that your bills may increase, even though we fight as much as possible to keep them low, but our dividend income typically grows through dividend increases and reinvestment! This ultimately means our income keeps up, at least, with the increase of price (hopefully).
What do you guys think of this approach? Ever have fun with your portfolio and think of it as a way to pay off your debts, bills and other expenses every month? Obviously – need to make sure your portfolios aren’t weighted in certain directions and to keep it balances, but it definitely makes me smile knowing that expenses are taken care of by the same or similar stocks in that industry : ) Thanks everyone, hope you had a great weekend and talk soon!