The Bf Gf Portfolio – Realising The Power of Dividends (Part 1)

dividends

 

I am in the midst of restructuring my portfolio.  At first I was about to buy a couple of US stocks which I can leave alone and let them run for 10 years. But after I started blogging, I started to connect with other fellow investment bloggers who are highly-focused on building passive income through dividends.  You can check out their blogs in my tab ‘Friends, Affiliates & Partners’.

 

Why Dividends?

At first I did not see the power of dividends.  3%, 4%, 5%, per year… what’s the point?  I want to catch a ride on 10-20 baggers no matter how lofty that dream may be!  I want to watch a small investment balloon into a huge sum through compounded capital gains – BAM!

But after a discussion with an investor mentor of mine, he said this, “If I had one thing I would have done differently in 2009-2010, I would have bought more dividend stocks.”

This was coming from a man who was already holding 2 ten-bagger stocks, and several other 4-6 bagger stocks.  He holds mostly growth stocks that pay out very little dividends.

“Why?”  I asked.  Here I am, wanting to be the guy who own ten-baggers, while there he was, talking about buying conservative, stable, dividend paying stocks.

“Erm… you get cashflow to add more positions to your portfolio.  Imagine, if you have a substantial dividend income stream, you could be using that money to buy up stocks during a recession.”

 

That simple realisation hit me right smack in my face.  Of course! Dividends will give me the cash on hand to buy up beaten-down stocks in times of a recession, when most of my capital will be stuck in my 10 year-holding-period-stocks.  But in order to do that, I must start building a dividend income stream NOW.

Actually, I have already started doing that.  But my dividends have only been paying for short holidays with the Gf and my insurance policy every year.  This time, FY2015, I am formulating a strategy to have a portfolio focus 40% on resilient, dividend paying stocks to tide me through financially tough times. ( I have volatile income!) It will also act as a defensive fort in times of a market crash.  Collect dividends, buy up more undervalued stocks!

 

A Dividend Income Strategy

It seems several other bloggers have already gone for a strong dividend income investing strategy.  AK of  A Singaporean Stock Investor, revealed that he made about 120k per year through dividends.  The writer of ‘Lady, You Can be Free’ collected about 60k of dividends last year.  The blogger at MusicWhiz also collected about 14k worth of dividends in 2012….hmmm… I wonder how much he collects now?

What these bloggers did was simply to invest in dividend stocks, receive the dividends, and plow it back into more dividend producing assets.

I am no investment expert.  But I know some friends who are pretty good.  They are from the Fifth Person and they are now offering a dividend investment course here. From what I see, the course fees are really insignificant…you will easily earn it back from your dividends.  I really suggest that instead of going for that expensive date at a Michelin star restaurant, you and your darling, eat cai fan for a few days, and use that money saved to go for the Dividend Machines course.  From the course, use the knowledge you gain to buy good dividend stocks, get dividends, reinvest those dividends, and build up your own Dividend Machine!  After that, you can eat at all the Michelin Star restaurants you want.  ( Course seats are running out pretty fast though, when I last checked, I still saw 120 seats remaining…)

 

The Bf Gf Portfolio

Despite the sweet allure of passive income through dividend investing, I am still not willing to give up my dream of owning 10 bagger stocks.  I am still in the midst of researching and planning to restructure a Set-it-and-Forget-it portfolio with stocks I can hold for 10 years or more.  But oh boy, I see the power of dividends now, and I am definitely going to incorporate some resilient dividend-paying stocks into my portfolio.  Dear readers, I hope you see it too…

 

 

Stay tuned as I will be revealing some of the stocks I am adding to the Bf Gf Portfolio.  In the meantime, seriously, go invest in your knowledge.  Click the image below to learn how to build your Dividend Machine.

dividend machines

 

Oops!  The Dividend Machines Course is closed.  Don’t worry, the Fifth Person still have a main course called the Investment Quadrant.  This is a comprehensive guide to value-investing in stocks.  So if you are looking for some wicked capital gains (just like me), or wish to learn how to pick value stocks, you can still sign up by clicking the image below:

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21 Comments

  1. InvestingWolf

    Yea. Similarly, I started investing in the US for >1 year now and recently I am considering allocating more of my investment into SG Dividend Stocks to collect dividend income. Meanwhile, the best time to stock up is always post crisis. Lets have a good start from here on out. 🙂

    Reply
    1. The Bf (Post author)

      Hi Wolf,

      I have been scavenging SGX for value stocks for many years now. Only started buying US stocks late last year..Looking to accumulate more!

      Yes let’s have a good start this year!

      Reply
      1. jason

        Watch out for the impending correction and massively beaten down US counters in oil&gas….. good bargains to be had!

        Reply
        1. The Bf (Post author)

          Hi Jason,

          Yes there might be bargains! But… lately I have been thinking – instead of investing in cyclical companies like oil&gas, wouldn’t it be better to just invest in ‘scalable’ companies? E.g Starbucks, Chipotle, Buffalo Wild Wings, etc.

          These companies may suffer time to time from macroeconomic fundamentals, but, they will be free from cyclical demand!

          That’s something I have been thinking about lately.

          Reply
  2. B

    Hi BFGF

    But dividend counters are now so expensive. What counters are you looking in to buy now?

    Reply
    1. The Bf (Post author)

      Maybe Keppel Corp again, if the price drops.

      Reply
  3. Kel

    “Actually, I have already started doing that. But my dividends have only been paying for short holidays with the Gf and my insurance policy every year.”

    I’m doing the same as well. Haha.. It’s still a form of enjoying your dividends though looking at it from a different aspect. I feel that travelling allows me to learn culture and food from another country while insurance is a must if bad things were to happen.

    Sharing another lesson from a taxi uncle I happen to chance upon. He’s got time, kids grown up and working and debt free except monthly credit card. He told me, it doesn’t matter how you spend your dividends. As long as you have enjoyed it, it’s dividends well spent. It’s the foolish ones that doesn’t know how to enjoy the dividends, pumping it into more investments and end up eating and scraping month to month.

    Reply
    1. The Bf (Post author)

      The taxi uncle living at different age leh, I am poor now, so I must scrape and save and invest!

      Reply
      1. Kelv

        Still… I still see it as a minor form of investment, though not a monetary returns kind. If you didn’t travel and relax or see the world outside of SG, you won’t be able to enjoy the little things(cheap thrills) in life. Hehe…

        Reply
    2. Hakim

      Uncle isn’t 100% right. As long as those foolish ones enjoy their dividends by reinvesting it to generate more dividends ultimately its also dividends well spent.

      End up eating and scrapping month to month? Their monthly cashflow probably increase exponentially year on year with this especially if their dividend payout is spread out over 9-10mths out of a year. How do they end up scrapping month to month?

      Reply
      1. The Bf (Post author)

        I think Kelv is talking about being overly frugal to the extreme. But Hakim, I personally would rather be overly frugal than a spendthrift.

        Taxi Uncle don’t care about money already! He is enjoying life!

        Reply
  4. Bluemamba

    Seem like nobody cares about exchange rates when buying USD dividends

    Reply
    1. The Bf (Post author)

      US stocks got 30% tax on dividends so… for dividend stocks probably should just stick with SGX.

      BUT…

      I like US companies because they have the strong financials that I don’t see in SG. They also have global branding, scalability, innovativeness and economic moat. A lot of these companies are also trend setters, first movers…

      Reply
      1. Bluemamba

        This is getting ridiculous…having to post my name for comments…sigh. Here goes.
        The US is shrinking money supply recently and cost for us will increase. But betting in the US is generally a good idea, half of what I have goes there. If I were to sell them all, I would make a gain.
        I don’t think the 30% tax affect us as we are not US citizens. Am I correct? but hell, I still pocket some money.
        The low price of oil and gas could be a blessing for those not investing in it.
        BTW, India could be a luck charm.
        Investment is a long term affair and is a class different from buying and selling of stocks in DOW Jones or Singapore stock exchange. Investment is management.
        I think I am digressing a bit.

        Reply
        1. The Bf (Post author)

          It’s ok your identity is secret! HAHAHA!

          Reply
        2. Raks

          http://www.irs.gov/Businesses/U.S.-Tax-Withholding-on-Payments-to-Foreign-Persons

          30% withholding tax is on dividend payments to foreign individual. This is not the tax for US citizen. Tax on div to US citizen is another issue. It is a killer, to me, to buy US listed ETF, Index, or stocks.

          If your div yield is 6%, it would be 4.2% after tax. For the sake of argument, there’s no changes to stock price. The tax effectively re-rate the stock from PE 16.7 to PE 23.8.

          Reply
          1. The Bf (Post author)

            Hi Raks,

            Thanks for providing the info here. It will be beneficial to many readers.

            That’s why for US stocks, I don’t want to care so much about dividend yield.

  5. paul

    I am also a firm believer of dividends, despite getting multibaggers before.
    i have structured my portfolio such that i get dividends every mth which are used to buy more dividend producing stocks, regardless of market direction. Feel free to visit my site.
    paullowinvestmentjourney

    Reply
    1. The Bf (Post author)

      Hi Paul,

      Cool site you got there! Exchange links? I will put you under my friends and affiliates page 🙂

      Reply
      1. paul

        sure. thanks for visiting also!!!

        http://paullowinvestmentjourney.blogspot.sg/

        Reply
  6. Aaron

    hey nice. i like dividends investing also. didn’t know abt it till my wife pass me this article
    http://thenewsavvy.com/invest/equities/dividend-investing-101/
    no doubt it is from female magazine… lol
    but i will still benefit as a man right?

    may i know when would part II be out?

    Reply

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