Happy New Year everyone! Like most, I am sure glad 2020 is behind us. It goes without saying that 2020 was a crazy year, from the wild market swings to the economic, healthcare and political shocks. Let’s all hope that 2021 will be a better one.
Whilst 2020 was indeed a bad year on most accounts, we also need to appreciate the good that has come from it. Being brought closer to family, having more free time to pursue hobbies and interests, technological progress and the sheer ingenuity and fighting spirit of human beings.
By now, 2020 may seem like old news , but let’s take a look back how it actually went from my portfolio income point of view.
In Quarter 1, companies I have an ownership stake in sent £1,150 my way. In Quarter 2, that figure was £790. The Quarter 3 figure was £974. And for Quarter 4…drum roll please… £865!
Looking at the year as a whole, the companies I own paid me dividends totalling £3,779.
Earning £3,779 a year is equivalent to earning £314 a month, £72 a week or £10 a day.
I feel like I am in a truly blessed position. To have money rolling in without any active effort on my part is a wonderful feeling. Knowing I am earning £10 each and every day no matter what I do is simply amazing. It is like having your own universal basic income scheme.
And this £3,779 figure is only set to grow next year. Just like my total 2019 dividend income figure has been larger than my 2018 figure and my 2018 figure has been large than my 2017 figure, I expect 2021 to produce more dividends than 2020.
Just take a look at my annual dividend figures since 2015:
- 2015 – Dividend Income Received £ 35
- 2016 – Dividend Income Received £ 858
- 2017 – Dividend Income Received £ 1,501
- 2018 – Dividend Income Received £ 2,432
- 2019 – Dividend Income Received £ 3,685
- 2020 – Dividend Income Received £ 3,779
Just the type of increase I like to see.
Going from a throw-away figure of £35 in 2015 to £3,779 today feels amazing! But that is the power of compounded dividend income.
It does seem a surprise that my dividend income is higher in 2020 than 2019 considering all the dividend cuts the market has faced. Yes, I did add money to my account over the course of the year. But the truth of the matter is the majority of companies I own became better businesses over the past year. They became lean. They became efficient. I am also of the view that recessions are good for big business and lockdowns have turbocharged this. Many big business will face a less intense competitive environment going forward and it is shocking to say but the outlook for many are even brighter than the years before.
If 2020 has taught me anything it is that big business comprises of flexible, adaptable cash generating machines. Yes, times like these hurt the smaller players but big business just keeps marching on. People will not stop eating Cadburys Chocolate (Mondelez) or stop drinking Coca Cola (The Coca Cola Company), or stop using Fairy dish washing soap (Procter & Gamble) or stop searching on Google(Alphabet) or stop using their Visa cards (Visa) just because there is a recession.
If you want to make money, you need to stop whining that Tesco and Sainsburys are able to sell clothes whilst other apparel shops need to close. You can’t change the system. Instead, you need to accept the system for what it is and use it for your advantage. Tesco & Sainsburys being public listed companies means anyone can be an owner in them. You simply need to open a brokerage account (LINK) and buy shares in the companies you want. And that’s it. Let the management of these companies make the tough decisions for you. And when the companies make a profit, you are entitled to a share of the profit as an owner and the business could decide to pay a dividend. Cha-ching!
Looking at the year ahead, I fully expect the dividend figure to be substantially higher than that I received over the last year. Many companies have announced they are resuming dividend payments after a pause in 2020. This coupled with a number of my portfolio companies announcing ahead of forecasts trading statements, 2021 could prove to be a very good year.