Have you made your resolutions for the new year?
As we prepare to usher in 2024, some might start to think about what we want to achieve for the new year.
I have a resolution that I’m sure many income investors will resonate with .
I want to boost my dividend income in 2024. In other words, I want to receive more dividends than I did this year.
It sounds like a big goal, but it’s not impossible. I’ve been doing it for years.
How do I do it? Let me tell you.
An income-focused mindset
I love dividends. It’s the reason I started investing in the first place.
My first stock was Suntec REIT (SGX: T82U), which I bought during its IPO in 2004. I only had S$5,000, but I was excited to get some shares.
I still own those shares today, and they still pay me dividends every quarter. They are like a gift that keeps on giving.
I realised how helpful dividends are for my family’s finances. They provide extra cash that we can use for our needs and wants.
So, I kept buying more dividend stocks over the years. In 2006, I bought Boustead Singapore (SGX: F9D) and followed by VICOM (SGX: WJP) in 2012.
Both stocks are still in my portfolio, and I have never sold them.
You can do the same with your portfolio.
You can add more dividend stocks to it over time. They will give you a growing stream of passive income that can support your active income.
REITs come into the picture
I used to chase growth stocks in the early years of my investment journey.
The excitement of seeing your stocks grow in value was attractive. But over time, I felt that dividends are more rewarding.
Nothing beats receiving a dividend that goes straight into your bank account.
That’s why I added more REITs to my portfolio later.
REITs are great for dividends. They own properties that generate rental income. I bought Keppel DC REIT (SGX: ABJU) and Frasers Logistics & Commercial Trust (SGX: BUOU) in 2017.
Again, both REITs increased my dividend income.
Then, I bought Singapore Exchange (SGX: S68) in 2018. As a monopoly with a strong business, it’s a dividend stalwart that runs Singapore’s stock market.
More importantly, it pays me dividends every quarter.
One of my noteworthy buys was DBS Group (SGX: D05) in 2020. You know it as Singapore’s biggest bank. I bought it when the COVID-19 pandemic hit the market.
It was a rare opportunity to get it at a bargain price.
Gunning for higher dividends
Dividends are the rewards I get from investing in great companies. They help me to grow my income over time.
My annual dividend income has increased significantly since I bought Suntec REIT in 2004.
The best part is that strong companies can raise their dividends over the years.
For example, SGX recently hiked its quarterly dividend from S$0.08 to S$0.085. Not to be outdone, DBS Group raised its quarterly dividend from S$0.36 to S$0.48.
The increases mean I can get more dividends without buying more shares.
But I won’t stop there. I can also reinvest my dividends and add more capital to my portfolio when I can. This way, I can buy more shares of my favourite dividend stocks.
This is what compounding is all about.
Albert Einstein once called compounding the “eighth wonder of the world”.
I agree. It’s the magic that makes my dividend income grow faster and faster. The beauty of investing is that you have the choice of adding more money over time as you save up or receive a bonus.
The combination of higher dividends by companies and the addition of more money into these companies provides your dividend stream with a “double boost”.
Get Smart: A dividend resolution for 2024
Increasing your dividends may sound like a simple process, but it requires patience.
Just like the resolutions one makes to hit the gym more often or cut down on carbohydrate intake, building up a solid dividend-paying portfolio requires discipline.
Will you be adding more dividend stocks in 2024?
Or will you be more comfortable buying more of your existing positions.
Whatever the case, you now know the “formula” for generating higher dividends next year.
I will be doing a bit of both.
Bear in mind, the ultimate goal is not just to increase my dividends for next year, but to allow compounding to help me increase my dividend flow over the decades to come.
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Disclosure: Royston Yang owns shares of VICOM, DBS Group, Suntec REIT, Keppel DC REIT, Frasers Logistics & Commercial Trust, Boustead Singapore Limited and Singapore Exchange.
