Throughout my nearly six years of dividend investing, I have transferred capital from my bank account to my investment account and bought stocks on an irregular basis. I did a lot of investing from 2008 to 2010, but I slacked off in 2011 and 2012 and made few stock purchases. In 2013, bolstered by sales of employer stock options and stocks, I bought dividend stocks without having to expend capital (which enabled me to expend a serious chunk of capital on a house…).
For 2014, I decided to take a different tack. Instead of transferring capital and buying stocks whenever I could afford it or simply felt like it, I would regularly transfer capital (mainly from my checking account) to my trading account, matching approximately dollar for dollar the dividends earned the previous month. For example, if my January dividends were $380, then in early February I would transfer $380 from my bank account to my trading account. With the cash infusion, I would be able to make at least one stock purchase per month, thus adding regularity to my stock buys which should accelerate the growth of my dividend income.
So here is my matching program for the year so far:
How has this worked out? Well, it’s been both heaven and hell.
Heaven: By making stock buys regularly, my dividend income has risen rather nicely (I should note that a sale of my employer’s stock options didn’t hurt my stock buying capability either) and I’m on track to easily meet and beat my 2014 goal of a projected average of $500.00/month in dividend income.
Hell: Capital contributions take a noticeable bite out of my bank account every month, so it’s been difficult to rebuild my savings (severely depleted by my house down payment and closing costs back in December) and my checking account balance can get perilously low for a brief time. I’ve also realized that if my dollar-for-dollar matches grow faster than my net pay, then the sustainability of my dividend matching program is in doubt. If being able to save is a modest challenge now, what will it be like 1-2 years from now?
Given the above pros and cons, will I continue my experiment in dividend matching? I’m not sure. Dollar-for-dollar matching is proving to be a real strain on my ability to keep my checking account at a comfortable level and to rebuild my savings. I may dial it down by contributing 50 or 75 cents for each incoming dividend dollar. Doing that would certainly impact my stock-buying capability, resulting in fewer stocks being purchased each month and a reduced rate of growth in dividend income.