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How I Hit $100 A Month In Dividend Income

Published August 24th, 2021
This is a Guest Contribution by Tanja Fijalkowski

I just turned 30 and hit an average of $100 a month in dividend income. I did it through a combination of dividend-paying stocks and private REITs like HappyNest.

I paid off my student debt in early 2019. Over the course of my first ten years in the workforce, every time I got a raise, I upped my payments – not my living standard.

Because of that, I had grown quite accustomed to simply forking over extra income to every Millennial’s favorite institution: Sallie Mae.

It was nice to see my savings account getting the treatment it deserved. Never had I actually had the opportunity to enjoy my full paycheck and build wealth.

In the last year of my student loans, I had been paying between $800 to $1000 a month. Now my paycheck would hit and a decent slice of it just…sat there.

Making Concessions

After I had shucked off that massive net worth strangler that is student debt, I thought about getting my own place.

But that would have upped my rent by over 50%. I happened to be living with people that I had great synergy with, in a neighborhood I really liked, so I decided I wasn’t in any hurry. I also considered that I could instead use this time to save up a down payment.

Research and Due Diligence

I’m big into podcasts, so I tuned into some new shows on investing, cryptocurrencies, and real estate. There are some really good ones out there – I really enjoyed Rebel Traders and We Study Billionaires where I was introduced to a host of investing strategies and philosophies.

It seemed to me there were two primary investment markets: the stock market and real estate.

Ready to dip my toe in, I placed my first trade. With every paycheck, what used to go to Sallie Mae went into the market.

I mostly went with safe bets, such as BlackRock ETFs, fractional shares of Berkshire Hathaway, and Vanguards high yield ETFs. I might as well ride on the big boys’ coattails.

I’ll never forget my first dividend payout – $6.54 from Blackrock. I finally understood what Warren Buffet meant when he said, “If you don’t find a way to make money while you sleep, you will work until you die.”

Finding My Own Strategy

That night, I stayed up until the wee hours of the morning researching dividend-paying equities. Over time, my general stock picking strategies composed of the best combination of low share cost, upward trend with growth potential (midcap), and above-average yields relative to the industry.

I cross-referenced that against the company’s last couple earnings report. If the company had maintained or increased its dividend payout for the previous three quarters, I made my move.

After doing some research, I came upon Hercules Capital Group. At the time, they offered 9% quarterly dividends, which amounted to about $1.25 per share annually. Given the shares were under $13 at the time, the return on capital was hard to beat. For almost six months straight, I went hard on building a position in Hercules.

Then March 2020 rolled around. I had accumulated over 500 shares of Hercules. In February 2020 dividend notification. I was at my peak equity holdings. Hercules announced a $0.08 dividend payment in addition to the regular dividend – totaling $0.40 distribution per share. That meant I was getting $208.00 – or over 15 new shares – dropped in my account.

Hard Lessons About The Stock Market And Diversification

The flash crash of March 2020 was a big reality check for me. With 70%+ drops across the board, every penny of profit I had made over the previous year was wiped out overnight.

To make matters worse, more than half the $19,000 principal I had put in over the course the previous eighteen months (supplemented with tax returns and stimulus checks) was gone. I had positions in 8 companies/ETFs – and I was bleeding everywhere.

When the market started to bounce back in late April and early May, I started to feel uneasy about putting more money in.

For one, it seemed to me at the time that there was still a lot of uncertainty about the pandemic and subsequent lockdowns at the time. The recovery seem a little strange to me – it smelled like a bull trap.

Private REITs

That’s when I started to think about alternative investments. Through my dividend stock strategy, I knew Real Estate Investment Trusts, or REITs, had some of the highest yields of any investing category.

Having seen that the whole market could be hit at once, it didn’t feel like much of a diversification strategy to buy REIT stocks. But I found that not all REITs are publicly traded.

As a result, they aren’t grouped into ETFs. They also can’t be shorted – both of which are public market influences that can divorce the share value from portfolio performance.

Private REITs do carry their own risk factors.

They aren’t required to file reports with the SEC, making them less transparent. Some funds have been known to charge high management fees, eating into investors’ potential returns.

But no investment comes without risk, and it seemed like a good way to diversify against my publicly traded investments. I set about reviewing private REITs that I could afford to buy into.

Ultimately, I settled on HappyNest for a few reasons.

For one, their share price was only $10.

Secondly, their portfolio was simple and strong. It consisted of an industrial shipping distribution center that is currently leased out by FedEx on an 8-year lease. With the tremendous growth in e-commerce over the last few years, it’s hard to think of a more steady tenant.

Likewise, they also had a commercial property on a 10-year lease with CVS. Like the FedEx property, CVS’s growth pretty much guaranteed consistent rental income.

I downloaded the app and started picking up shares every month. Based on HappyNest’s recent dividend payouts, I’m netting about 6% a year in returns, paid out quarterly.

Hitting $100

Between my HappyNest holdings and stock holdings, I’m currently producing $100 a month in passive income. That’s based on about $40,000 principal to date, invested over about two and a half years.

Now that I’ve seen how the snowball works – and how it grows faster the bigger it gets – I am more motivated than ever to keep the ball rolling.

Next stop: The comma club.

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