Dividend Snowball Investing
Remember when you were a kid and pushed down a small snowball down the hill. When it reached the bottom of the hill, this small snowball became an enormous snowball. Depending on the length of the hill, the longer, your snowball would pick up more snow and built a bigger and bigger snowball. Dividend Snowball investing works the same way as rolling the snowball down the hill. The longer you are investing in Dividend Growth Stocks and reinvest your dividends, just in the matter of time, your dividends will grow into an enormous amount.
For example: If you invested $10,000 in JNJ in 1995 and re-invested the dividends. Today you will have $144,206 that is a compounding of 11.29% annually.
Steps to build Dividend Snowball Strategy:
- Buy only good dividend growth stocks with the history of yearly dividend increase. You can choose from the list of Dividend King or Dividend Aristocrat . Make sure the payout ratio is not higher than 75%. The smaller payout, more chances the company will increase more dividends in the future.
- Contribute each month to buy more shares you can have enough dividends per month. Consistency is the name of this Dividend Snowball game. When you can buy dividend stocks for income every month, this approach is called Dollar Cost Average. This approach will reduce the short-term volatility in the broader equity market. It is the best tool for an investor to build saving and wealth over period of time.
- Reinvest the dividends each month back to buy more shares. This is an effective way for long term investors to accelerate their dividends growth. Sometime companies may offer price discounts on stock. And you don’t have to pay commission for reinvesting dividends. This strategy is all win-win for long-term investors.
- Time and patience for your dividends to grow. This Dividend Snowball investing requires a period of time (minimum of 5 years to 20 years). Also you need patience for this investing method because its slow growing process. After investing in this Dividend Snowball for 3 years, I can see that my monthly dividend income is above $1000.
Summary
With time, patience and consistency, the Dividend Snowball Investing will cover your monthly expenses. What you think about this strategy? Do you want to follow me how I achieve my financial freedom using Dividend Snowball Investing?
Thanks for reading,
Sam
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