My business turned into profit while I kept investing in dividend paying stocks

Hey there, fellow readers. It has been quite a while since I’ve published a new post. In fact, my latest dividend income update was in November 2022.

My full year 2022 dividend review is more than due.

2022 has been incredibly dynamic and I have been extremely busy building and growing my own consulting business I started early last year. I am extremely happy that my company is doing very well. Our savings rate however fell quite significantly. While in 2021, our savings rate stood at around 65 %, it was around 10 % in 2022. My business turned into profit pretty fast, but my income has been lower in 2022 than in the previous years. So, our investment process slowed quite a bit, but I still managed to save a decent amount of money to put to work and last year I bought stocks of strong businesses like Mondelez, Hershey, Visa, Nike, ASML etc. strengthening our investment portfolio further.

It was in 2016 that I started this blog to document our Journey towards Financial Independence by 2024. Our initial plan back then was to build a sizeable dividend stock portfolio plus further investments covering our annual spendings which range from around USD 50’000 to 55’000 annually. As you can see from this update, there is still a long distance to go. But what’s clear: dividend growth investing really works. After a few years, the power of the compound effect really shows. And our passive income maching slowly but surely is gaining more and more steam.

USD 20’000 passive income in 2022

In 2022, total dividend income was 17’430 Swiss francs respectively over USD 19’000 (one Swiss francs corresponds to around 1.1 USD). We also had some additional passive income from Peer to Peer Investments and from corporate bonds plus interests on our savings accounts. Altogether, these interest income streams amounted to around USD 1’000. So grand total, our passive income amount was around USD 20’000. That’s quite significant. Let’s put it that way: one third of our annual spendings of our family of four is covered by passive income!

Now, let’s quickly go through some numbers. Here’s the update of the last two months in 2022 (November and December):

Compared to November 2021, there was a massive increase of over 50 % on the back of hefty dividend payments of mining company BHP Billiton and oil giant Woodside Petroleum.

December 2022 was very strong as well.

December Passive Income jumped by around 25 % Year over Year mainly due to new investments made in 2022 plus consistent dividend reinvestments I made through the year.

As my consulting business has turned into profit, I also incrased my salary. And as my income has incrased significantly over the last few months, I am now able to step up my investment process quite significantly.

Targeting passive income of over USD 20’000 for 2023

Since 2012, cash flow generation of our dividend stock portfolio has been growing quite strongl due to a combination of following factors:

• dividend hikes (organic growth)
• dividend reinvestments
• addition of new positions and increasing existing holdings by putting new funds (savings) to work

Over the next months I plan to invest at least USD 50’000 into our investment portfolio which currently has a market value of roughly half a million.

Our initial plan was to achieve Financial Independence by the end of 2023. It might take a few years longer. But that’s completely fine, we keep enjoying our path and we have so much flexibility in life.

For the time being, we stick to our initial plan and continue to work hard, save a as much cash as possible which is fueling our consistent investment process.

The Pursuit of Financial Independence had so many positive effects in our life.

For instance, I left the corporate treadmill and started my own business which has been a dream for quite a while.

We have built a nice portfolio consisting of strong income generating assets and we also a very nice cash pile. It’s great to have options in life and not having to rely on a job or a boss. That’s just a few of the huge benefit of pursuing Financial Independence.

Take care, fellow reader, and thanks for your interest in our journey.

I hope to be able to return to my monthly dividend updates very soon. I’ve been doing so for more than six years, since 2016 when I started this blog to document our Journey towards Financial Independence by 2026.

We are still working towards that goal and in fact having been streamlining our finances and establishing various passive income sources for years certainly played some role in my decision to start my own business.

From January to October, grand total of our our investment portfolio net income was USD 16’000, an increase of 60 % compared to the previous year. That corresponds to a big chunk of our fixed cost block.

So, without further ado, let’s have a look at the last six months in terms of passive income, starting with October.

October showed a nice 26 % passive income jump on a year over year basis

Compared to the previous year with USD 725 in passive income, October 2022 showed higher amounts due to a combination of

• organic dividend growth
• dividend reinvestments plus
• added or increased stock positions (Nike as well as Woodside Energy, a spin-off of BHP Billiton).

As you can see, commodity, resource and oil businesses (British Petroleum, Total Energies, BHP, Woodside Energy) as well as insurances (AVIVA) make up for the bulk of my passive income contributions not only in particular to this month but with regard to the portfiolio in general.

What’s also worth noting that new shares of existing position ABB – called Accelleron Industries – have entered my portfolio with a market value of around USD 90. Spin-Offs are pretty nice additions, for instance in the case of BHP Billiton, two separated companies – South32 and Woodside Energy – made interesting additional dividend payers.

September dividend income in line with previous year

September 2021 was already a strong month with around USD 1’460 in dividend income. This year, it was more or less the same amount generated by dividend paying stock positions.

However, in particular on the back of witholding tax reimbursements in the amount of USD 985on Swiss stocks such as Nestlé, Roche, Novartis etc., September became a particularily strong month.

August showed a passive income increase of 38 %

Early in 2022, I added three new stock positions which contributed nicely to our passive income stream:

• Starbucks
• Ems Chemie and
• Procter & Gamble

July passive income was pretty in line with the previous year

While there was some nice organic dividend growth in the case of Coca Cola, Mc Cormick and L’Oreal as well as positive effects from dividend reinvestments, overall total passive income was more or less in the same range as in the previous year due to significantly lower interest income from Peer to Peer investments which I have been further reducing for many months.

It’s worth noting that pharmaceutical company Glaxo Smith Kline (GSK) made a spin-off. The new shares of Haleon I received had a market value of around USD 690 at the time of the distribution and I will keep this position. Sometimes, spin-offs can make interesting positions over time (see BHP which separated South32 for example).

A very cool 100 % passive income jump in June

June showed some very positive effects in form of special dividends (Admiral, Tate & Lyle). Furthermore,

• organic dividend growth (Mc Donalds, PepsiCo etc.)
• dividend reinvestments (Legal & General, Royal Dutch Shell etc.) and
• new stock positions (Hershey, Estée Lauder etc.)

contributed to the overall income jump.

50 % higher passive income in May

On the back of a huge special dividend from UK insurance giant AVIVA in the amount of over USD 2’400, May showed a very strong month. In fact, in that month, my passive income considerably exceeded our household spendings which is always a very nice thing to see.

What about you, fellow reader, have you added some stocks to your portfolio recently? How is your passive income developing

Disclaimer
You are responsible for your own investment and financial decisions. This article is not, and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.

My new created business had a good start and we continue working hard towards Financial Independence

Hey there fellow reader. It’s been quite a while since I’ve published a new posts. In fact it has been four months since I’ve published my last passive income income update. Sorry about that!

I’ve been documenting our journey towards Financial Independence since September 2016 and for over six years I’ve consistently reported on a monthly basis our progress we made in terms of streamlining our finances and establishing passive income sources.

However, the last few months have just been just so incredibly dynamic and it’s just now that I have been able to take a breath and write this post.

As I’ve written in some of my previous posts, I quit my job early this year to start my own business. It was a tough and risky move to leave my well paid position to do something I feel really passionate about and build a company providing e-learning and consulting services.

And I am so glad to say that this was the right move. My company started well and I’ve been able to win clients. I can see a healthy demand for my services.

Of course, there is a massive amount of work to do and to invest, in order to bring my company to the levels I want it to be.

I will continue to document our journey towards Financial Independence which my wife and I want to achieve by the end of 2024 and I will try to resume my monthly passive income updates on my blog MyFinancialShape. I will also continue to write for the investment blog SavyFox which a very good friend and I started last year.

In fact, if I hadn’t followed that path towrds Financial Independence, focusing on a down to earth lifestyle and investing regularily our savings for almost 15 years, my guess is that I would not have had the courage to leave my job and follow my dream. When it comes about Financial Independence it’s that process that is extremely empowering, it is about gaining flexibility in life, creating options and steadily building a strong position to reduce the dependency of a job. And of a boss.

So, without further ado, let’s have a look at the past four months, on how my dividend payers have developed compared to the previous year.

From January to April, our cash flow from Dividends climbed almost 22 % year over year

Over the first four months in 2022, roughly USD 4’500 have been generated from stock holding distributions compared to USD 3’800 in the preivious year. All these numbers in the chart below are in Swiss francs, which trades more or less at parity to the USD. The numbers are all net amounts after taxes. Witholding tax reimbursements are reported separately in my passive income updates.

When looking at the last four dividend months, the picture is very pleasing, showing healthy growth almost across the board.

Mining companies like BHP and Rio Tinto have been particularily strong but also the defensive positions like Nestlé, Unilever, PepsiCo, Coca Cola did not disappoint. Slowly, but steadily, my dividend generating stock portfolio is transforming into an strong cash churning compounding machine.

In 2021, we had total passive income cash flows of around USD 14’000 which was a nice jump compared to 2020 with USD 9’700.

My plan for 2022 is to achieve at least USD 16’000 which is roughly 15 % higher than in the previous year. This goal should be pretty achievable through a combination of

• organic dividend growth of most of my stock positions
• special dividends in particular from share holdings in the commodity sector
• dividend reinvestment plans (DRIPs)
• addition of new share positions as well as doubling down on existing stock holdings

On the other hand I disposed off all my tobacco shares (Altria, British American Tobacco, Imperial Brands) in 2021 and this move alone reduced my dividend income potential by almost USD 1’000 per year.

Furthermore, exchange rate fluctuations have been a drag. The Euro for instance lost almost 6 % against the Swiss francs in the last few months. The British Pound devalued as well against the Swiss francs.

However, a strong Swiss francs has been good for me, it makes international stocks cheaper. And amid hightened volatility in the stock market to be expected for at least the rest of 2022, there will be several buying opportunities to strengthen our stock portfolio even further.

What about you, fellow reader, have you added some stocks to your portfolio recently? How is your passive income developing?

Disclaimer
You are responsible for your own investment and financial decisions. This article is not, and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.

Hey there, fellow readers, I wish you all a HAPPY NEW YEAR!!

First, I have to apologize for my late monthly Passive Income Updates. The last few months have been incredibly dynamic.

I have started my own business

In December, I made the jump and resigned from my job.

Currently I am building my own consulting business and am also working part-time for my former employer in order to ensure a smooth hand-over to my successor.

It’s a win-win I guess, as I have still a few months where I get paid while at the same time I can get my business going.

It’s super exciting and so inspiring, but also a lot of work! I’ll certainly keep you informed about how things are developing.

A brief look at the financial numbers

More than USD 100’000 wealth accumulated in 2021

The previous year has been an amazingly strong one in terms of wealth creation.

Our savings rate hit almost 70 % in November and December and over the year, total market value of our investments surpassed USD 550’000 with USD 600’000 in liquid assets plus corporate bonds. Unfortunately, once again, due to the COVID-19 pandemic we have not been able to realize our major real estate project abroad and deploy our cash pile.

Very strong performance of backbone stock positions

On the back of very strong performance of my largest positions such as Nestlé, Roche, LVMH, SIXT, L’Oreal etc. but also of medium-sized holdings such as Campari, Ferrari, Pernod Ricard and Diageo my dividend portfolio grew handsomely.

As I have always been quite heavily invested in insurance businesses (Swiss Life, Zurich Insurance, Swiss Re, Aviva, Legal & General, Axa, Allianz etc.) and still have some exposure in bank stocks (HSBC, UBS etc.), my investment portfolio has been a beneficiary of rising interest rates.

Positions in oil supermajors and miners (Shell, BP, Total, Chevron, BHP, Rio Tinto, Glencore etc.) did particularily well in the past months while my tech portfolio came down quite a bit. There is clearly a secor rotation going on which is fine, as this always provides nice buying opportunities.

December passive income + 345 % YoY

While November 2021 passive income was pretty in line with the same month in 2020, I finished December with a big jump: Swiss francs (CHF) 1’239 resp. almost USD 1’400 which was roughly 3.5 times higher than in the previous year.

Main December passive income contributor has been our “parking money”, some portions of our relatively large cash pile we put into corporate bonds and on savings accounts to generate interest income.

A total of USD 14’330 passive income in 2021

For the previous year, I had set a goal of USD 15’000 which we slightly missed.

But still, it’s significantly higher than the USD 9’721 in 2020, we are speaking here of a + 47 % passive income jump YoY.

The main reason for the “earning miss” was the fact that I sold off my tobacco stock positions (Altria, Imperial Brands, British Tobacco) early in 2021. Without these disposals, the USD 15’00 passive income target would have been easily achieved.

But what clearly showed as a drag in terms of passive income generation has been great in terms of wealth accumulation as with the free cash from stock disposals I had bought shares of L’Oréal, Pernod Ricard, Ferrari and French oil supermajor Total early in 2021. All these investments had an excellent run so far and I am very confident in the growth potential of these stocks.

So, despite the “passive income earning miss”, 2021 has been an excellent year and I am looking forward to what the new year will bring.

What about you, fellow readers, did you achieve your financial goals in 2021? Thanks for sharing your thoughts below in the commentary section.

Disclaimer
You are responsible for your own investment and financial decisions. This article is not, and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action