What Would You Do With $1,000?

 One thousand dollars can seem to be a lot of money, when you have no money.

I am in the happy position where I can lay my hands on a thousand dollars, just at the click of a mouse button.

I am not talking in terms of credit cards nor am I talking of home equity lines of credit.  I have several tens of thousands invested.  This has come to me over the past fifteen years, but I have invested since the late 1970's.  To read how I built an investment stream that pays me daily you can read "Creating a Dividend Ladder""

 

One thousand Dollars is just ten Benjamin's 

That will not buy you much on it's own. I am talking for myself here, $1,000 can pay your rent, in part, for a month, buy you a month worth of food, pay off part of a loan. But for me, I would look to invest it.

So what would I invest it in?

I would look to my M1 Finance account. There I could invest it in a multitude of companies.

I have a portfolio of 100 company stocks and Exchange traded funds.

You can see my portfolio as it stands today at My Dividend Portfolio. If you use this link to open an account, you will receive a bonus of around $30 sometimes up to $50. I will also receive a commission for introducing you , this is at no cost to you.

I could also buy about two Vanguard S&P 500 Exchange Traded Fund shares ( VOO ). This holds all of the top 500 companies in the U.S. stock market in a very low cost Exchange Traded Fund. It therefore guarantees at least near market returns, plus some quarterly returns in the form of dividends.

So for me investment is where I put all of my income. Then I use the proceeds of the investments to pay for day to day expenses.

Some of the spare change, if I have any, would go to possibly investing in either California Municipal Bonds, these are reasonable payers of regular monthly dividends, but have the bonus of being free of income tax since I live in California.

I might also put some in to Crypto currencies like Bit coin or Etherium, I have an account at Block Fi where I stake some of these coins to receive a monthly interest payment.  You can receive $10 in free Bitcoin when you open a Block Fi account using my link here. Get $10 of Bitcoin when you open a Block Fi account here.

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Investing For Income

Why Invest For Income?

For me. investing is all about creating cash flow and income.

If I did not receive a return on my assets without having to do more work, then I would not bother with investing.

It is all well to invest in Google, Tesla or Amazon. They may be good stocks, at least two of them are, and I do own some Google and Amazon stock.

Cash Flow is King

But non of these stocks pay a dividend. Did I say that I love dividends?

Well most of my portfolio is made up of stock paying a dividend some monthly, some quarterly, some every six months or so and some only pay once per year. But I love that cash flow that comes with a dividend.

I hate wondering if I need to think about selling a stock. Has it made enough money for me? Is it distorting my portfolio? Is it time to rebalance? Questions? Questions? Questions?

With a dividend stock I can buy more with a dividend re-investment plan (DRIP). I can take cash and re-distribute that cash into other stock, or I can take the cash and spend it.

Love it!

How do I choose a dividend stock?

First I look for a stock that is making a positive cash flow, and has done so over several quarters or years.

Then I look at the current yield of the stock. All dividend stocks show a yield in respect to their current share price. I like a 1.5 to 3.2 percent current yield.





You do not want to get carried away with a dividend yield. Too high can mean that a stock is too low in price, so may have other issues or it may be funding its dividend by borrowing.

The 1% to 3% area is a sweet spot. Giving a company a chance to grow its dividend and not stretching its income too much and there by giving it cash to grow its bottom line.

Most dividends are just a few cents per share, most of my stock pays in the region of 40 cents per share, but do not concern yourself with that. Buy ten shares paying 40 cents and you earn $4 or 100 shares and a dividend of $40 will be winging its way into your pocket or portfolio.  Compunding is the key here.



Lots of 1 cents make up a dividend income of $1,000 in time. I earn several thousand dollars from my income in dividends per year. Enough to make a car payment every month, or keep me in Starbucks coffee every day. But at the moment I prefer just to re-invest the cash back into more stock.

I generally do not concern myself with daily fluctuations of the stock market. If I need another $10 in a particular month I add to a stock paying in that month or one paying the $10 over the year.

As time passes you find that your dividend yield over cost is what matters, not the current yield.

For instance You buy a stock yielding 2% it increases its dividend annually, the stock price rises, but the yield on a daily basis falls. The stock you bought initially will still be paying you 2% and subsequent purchases will change your overall percentage yield over time, the stock always pays you the yield at the time of purchase. Buying over the long term and holding means that you have little bundles of stock paying 2%, 1.8%, 6%, 0.9% and so on so your yield on cost could grow.

At present I have one portfolio paying a 4.32% yield on cost where the average yield is only 2.65%. Just because some of the stock was bought back in 2008 when stock price were low and yields jumped for many stocks during the Financial Crisis.

Back to the DRIP

With the fall in the market over the last week I am looking to adjust some of my programs.

As markets rose I switched from using DRIP's (Dividend Reinvestment Plans) to taking dividends on my higer paying stocks.

Stock prices were just too high to warrant buying and reducing the dividend yield. So better to take the cash and wait on the sidelines till some of the prices began to come back and dividend yields rose again.

We are now entering the region where many of those dividend yields are coming backto looking very attractive to me again.

Yeilds are coming up on some of my stock to above 6% and so as this month is mid year and both the second quarter dividend for many stocks as well as this week being a paying week for many monthly dividend paying stocks I am putting back Drip plans into force for the month.

We will see if prices rise again at the end of the month if I will continue the strategy for July and August too.

So there will be little cash entering my funds this month. I am going all in on DRIP's for the hugher yields.