I decided to chronicle my journey to F.I.R.E., which stands for Financial Independence Retire Early. In early 2021, I received an inheritance of approximately $275,000 and wanted to see if I could use that money to make investments that would allow an early retirement.
Recapping How I started Out
When I first started, I went with what I knew - long term growth stocks. I opened an account at Vanguard and began investing in some of their higher growth funds such as Wellington and Windsor. This took place from January until early May.
After some further research about what people were doing, I came across dividend investing and the two strategies that existed there - Dividend Growth Investing and Dividend Income Investing.
With Dividend Growth Investing, many people search out safe stocks that provide long-term growth and a moderate dividend yield that they can reinvest when businesses pay out that money on either an annual, quarterly or monthly basis.
The second option, Dividend Income Investing, is investing in higher yielding stocks that supply an income that a person can live on immediately. As I wanted to reach retirement as soon as possible, this type of investing was what I was looking for. It would allow me to use my lump sum inheritance and receive enough monthly income to cover my living expenses.
So in early May, I shifted out of the long-term growth funds and into Dividend Income stocks and funds.
In my research, I found a free online brokerage I liked call M1Finance.com and set up my account and linked my bank account to allow easy access for sending over deposits. I imported my Vanguard account and kept adding money.
M1Finance allows you to set up auto-investing in something they call pies. You select the stocks you want to invest in and the percentages you want in each and they automatically break up any money you deposit into your account and distribute it accordingly.
My Initial Investments
I had read about a few companies that I liked and after determining that they fit my goals, I decided to put 90% of my investments into three monthly paying dividend stocks: Global X NASDAQ-100 Covered Call ETF (QYLD), Orchid Island Capitol (ORC), and Cornerstone Strategic Value Fund, Inc. (CLM).
With gas prices skyrocketing in early 2021, I put an additional 10% into high yielding gas shipping companies: Frontline Ltd (FRO) and DHT Holdings, Inc. (DHT).
I had read that all of these had a yield of over 10% and that was what I was looking to gain per year on my investments, with Cornerstone the highest at around 16%. DHT paid quarterly and FRO yearly, but both were seeing the types of gains in growth that offset some of the volatility I was seeing in the monthly payers.
I had heard that the market was due to correct, so I kept about half the inheritance back and had about half in by the end of June of 2021. From then on, I planned a dollar cost strategy of adding $3800 per week to offset any volatility.
DHT did end up cutting their dividend in the second quarter and I became antsy not to see the monthly benefit from their ownership, so I ended up selling both it and FRO in late June, netting a $2,000 profit on a $16,000 initial investment.
I tried some more speculation in tech stocks, namely biogenetics and an Alzheimer's research company, but got in just after their peaks and ended up giving back about half of the gains I made from FRO and DHT in a few days and vowed to never do that kind of speculating again.
When I sold my tech stocks, I moved them into RiverNorth/DoubleLine Strategic Opportunity Fund (OPP) which was another monthly payer with about a 12% yield.
So as of this moment, CLM, QYLD, OPP and ORC are my four holdings.
July 2021 Dividends
The first stock to payout in July was QYLD with a payment date on the 27th. On July 16, they declared their monthly dividend and it had risen back up to 22.29 cents per share after a dip to 19.39 cents in June.
When they dipped in June, I lowered my pie percentage so that it would not buy more shares and had the same 1,665 shares in July that I had in June. With a payout of 22.29 cents per share though, the monthly dividend rose up to $371.37.
June Payout(s): $322,97 and $309.58
July Payout: $371.37
The second stock to payout was Orchid Island on July 28. Their price had dipped at the end of June and I used that as an opportunity to buy low and increase my shares with one of my weekly $3,800 buys. The result was an increase in around a hundred dollars.
June Payout: $358.23
July Payout: $455.23
My newest acquisition had a record date of July 16 for a July 30 payout, so with almost 1,800 shares and a 15.9 cent pay per share, I was set for a $284.11 take on July 30.
June Payout: None, bought in too late
July Payout: $284.11
My largest holding and the one with the highest yield is CLM. Their record date was July 15 for a July 30 payout. I bought some more shares, but not until after the record date, so I was still set for a 16.02 cent payout on my 3,600 shares for another $501.77, but the dividend ended up being a bit higher than I thought it would be at $582.34.
June Payout: $501.77
July Payout: $582.34
Total Monthly Payout: $1,693.05
This monthly payout was an increase from the $1,490.96 even with QYLD paying out twice in the month of June. The June 2 payout for QYLD was a late one for May, but I put it into my June recap because that's when it came through.
Also, my total dividend income since starting my M1Finance account on May 10th is $3,271.18.
With ORC trading low, I bought more shares in the middle of the month and went from 7,000 to just over 7,600. On Monday, July 19, the market had a minor correction and most of my portfolio dropped in value. At the end of August, this will move the ORC dividend payout from $358.23 up to $495.21.
CLM lowered back to my average cost price near to 11.39 and I jumped at the chance to buy it on the low end. I increased my shares from 3,600 to just under 4,000 shares which will move my monthly payout from $582.34 to $635.99 going forward.
OPP also dropped below my average cost price of 15.68 all the way down to 15.29. I did not make a move on the stock, but am kicking myself now that it has risen back up to 16.00 by Friday.
By the end of July, I will have around $153,000 of the $275,000 invested into my portfolio.
A second change I made was that I set up a monthly payout annuity from my work retirement account. Every August 1st, I will receive a percentage of my retirement funds, minus taxes and a 10% early withdrawal fee, that I plan to invest into Rivernorth Opportunities Fund (RIV) which has nearly an 11% yield per year.
I will continue putting the inheritance money into my four main stocks, then yearly, add my work retirement money in RIV or Brookfield Real Assets Income Closed Fund (RA) which also yields right around 11%. Both are monthly paying dividend stocks and I figure that will add some nice diversity to my portfolio and will let my retirement fund make a higher percentage than where I currently have it parked.
The goal is to have the full inheritance invested by May of 2022, and by my calculations if I continue investing along these lines, I will now be bringing in a monthly dividend of just over $3,700, up from a $3,500 estimate thanks to buying low on both ORC and CLM in July and the addition of RIV in early August.
With a modest salary of around $48,000 in my current job which allowed me to do what I loved for over twenty-eight years, my take home pay after New York's deductions was just over $2,600 per month.
So those dividends will allow me to have a net of $1,100. Part of that net will need to be used on insurance, as I would have needed to be 55 to remain with my employer's insurance upon retirement and I won't be there by next May.
But after living expenses, that amount in dividends should allow the option to continue reinvesting a small portion per month in order to continue to increase the monthly dividend haul.
To that end, I have been investigating a few other high yielding stocks and funds to add some additional diversity to the portfolio and spread out some of the risk I'm incurring during this first year with those future reinvestments. An article at MarketBeat lists the full 432 monthly paying stocks with the ability to search by yields.
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.