We are living through history. And, as I suspect has been the case for most folks throughout history with a conscious feeling of “living through history,” it doesn’t feel great. The REIT Dude has been “sheltered in place” with Mrs. REIT Dude and Baby REIT Dude for a bit more than a month now. I am getting used to working from home. I actually love having more time to spend with the little guy. I’m getting plenty of reading done, and I’ve even lost a little weight since I can’t eat at my favorite (mostly Mexican and unhealthy albeit delicious) restaurants. So there are plusses to the whole experience. But I’m also furiously refreshing the Coronavirus control panel website, reading far more news than I ought to read, having difficulty focusing on work for long stretches of time, and generally worrying about the fate of the world (and the world economy). Like everyone else, I don’t know when we will return to public interaction; nor do I know when it will be safe to do so. Estimates seem to range from three weeks to three years.
Waiting for “shelter in place” to end feels a bit like being in an airplane that’s stuck on the tarmac. People get more and more stir crazy, drink too much booze, and every 20 minutes the captain comes on the intercom to say that it will be “just about another 20 minutes” before we’re ready for takeoff. Although, in this analogy, everyone on the plane is giving everyone else a potentially lethal respiratory infection.
As weird of a time to be alive as this is, it’s an even weirder time to write an investing blog. Because the truth is that I have absolutely no fucking idea what the market is going to do. Last week we got a torrent of bad economic and virus-related news and the market went up by about 12%. This week, apparently, it’s back to going down. But for all I know that will change by the time I’m done writing this post. The only thing I know for sure is this: Every single time the market has ever gone down, it has always been a buying opportunity for long-term investors. True enough, the market has never crashed due to a novel coronavirus before. But it has crashed due to unprecedented financial collapses, terrorist attacks, wars in the Middle East, and all manner of other jarring, often unique world events. I don’t know how bad this will get. I don’t know how long it will take to get better. But I do know that betting on the American stock market has always been the right bet, so I continue to do it, even though things look ugly right now.
But this crisis illustrates one of the main reasons why I love dividend investing. And one of the reasons why it may be the most profitable investing strategy out there. My overall portfolio value is down recently (whose isn’t?), but you know what isn’t? My projected dividend income. That is why I would urge every single reader of this blog to track your dividend income. Keep a spreadsheet and update it every 2-3 months. I use three columns: Ticker symbol, annual dividend, and number of shares. I multiply the latter two together to get my projected annual dividend income from each stock I own, and I add these together to get my dividend income for the year. The value of my portfolio might be down a bit, but as I keep buying more and more shares of quality companies at discount prices (i.e., with higher dividend yields), my dividend income keeps going up.
Between February and today, my projected annual dividend income has increased by about $700. That will only get better with time as companies continue to raise their dividends year after year and I continue to acquire more shares. Soon enough, I’ll have enough dividend income to pay my monthly expenses. And if that happens, it will be in large part due to the fact that I was able to use scary times like this as an opportunity to acquire more and more shares of high-quality companies (i.e., more and more little dividend factories).
To be clear, it takes a lot of luck to focus on investing when the economy is going through turmoil. I’m fortunate enough to have an emergency fund saved in cash, to have a mortgage that I can afford, and, most importantly, to have a job that I’m not worried about losing (at least in the near term). So I can basically throw all of my extra money into the market right now, and if the share prices drop by half, I’ll just keep buying more. A lot of folks aren’t in that situation. But if you are fortunate enough to be able to invest right now, do it with gusto, and try to tune out the share price movements and focus on those dividend checks piling up.