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How To Turn Part Of Your Life Into A Dividend Machine

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There is something to be said about arranging a small portion of your overall financial life so that it truly runs on autopilot and builds wealth organically without any additional effort on your behalf. The objective would be to create an infrastructure that allows you to convert one-time savings efforts into a literal dividend machine that creates permanent income without any further efforts on your part.

If you are interested in creating such a set-up, here’s how I’d go through the process.

Step One. You visit a credit union and open a checking account has no minimums. Fund it with $1,000 or so as your safety valve.

Step Two. Acquire cash-generating assets in a taxable account that can be directly sent to this checking account. For instance, if you had investments in Royal Dutch, BP, and Realty Income that combined to yield 5% of your total investment, you would have $1,500 flowing into this checking account if you set aside $30,000 to invest.

Step Three. Visit the Computershare website and find a company that charges no fees to automatically invest. Some candidiates are companies like Dr. Pepper, ExxonMobil, Becton Dickinson, and Aqua America. Also, there are companies like Procter & Gamble, Clorox, and Nestle that technically charge fees, but it usually amounts to .001% of purchase price or something like that (some are $0.03 in fees per share purchased).

Step Four. You set up the account to have $125 invested into those securities automatically each month. Maybe you DRIP $125 into Exxon each month, maybe you put $62.50 into Dr. Pepper and ExxonMobil each month. The choice is up to you.

Then, you can review it each year to adjust the payouts as necessary. Perhaps Shell, BP, and Realty Income will raise their dividends in the next year, which would allow you to increase the amount that you automatically DRIP into the accounts. The fortunate thing is that these dividends are gradually building up Exxon and Dr. Pepper positions out of nowhere—it took a one-time capital allocation of $30,000 to fund something that will get built up over the passing years.

If Exxon’s next thirty years are an exact duplicate of the next thirty, then those little $125 monthly deposits would create a position of $576,000. The Exxon position alone would be almost 20x the size of the starting amount of capital ($30,000) that you had originally used as a platform. And none of this takes into account what BP, Shell, and Realty Income may be up to in 2044. And nor does this take into account the fact that the $125 monthly figure would likely rise as BP, Shell, and Realty Income raised their dividends in the coming years. This type of plan should be an annually revised upward kind of thing. It’s funny how the profits generated from a $30,000 investment could eventually create a brand new ownership stake out of thin air that could go on to give you more dividend income in retirement than you’d get from Social Security payments. It’s all in the automatic nature of the compounding beast.


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