Today I checked my brokerage account and noticed Johnson & Johnson (JNJ) paid a dividend on the 80 shares I bought a couple months ago.
Not long after I purchased the stock, I set up a little spreadsheet indicating when the dividends for all my holdings were declared and when I could expect payment.
For some reason, I missed the September dividend payment from Johnson & Johnson, so today I got a nice surprise in my brokerage account.
The declared quarterly dividend was $0.57 a share, so my 80 shares yielded a $45.60 payment. Doesn’t sound like much, and I suppose it really isn’t, but considering I had to do absolutely nothing other than invest a bit of my money in their stock and sit back and wait for the payment, it sounds exciting to me!
That’s the great thing about passive income.
Consider too that this payment could have paid my cable bill this month, or filled up my gas tank, assuming I was no longer working for income.
Instead, I am currently reinvesting dividends to increase the number of shares I own in my core holdings.
At some point, I may switch this dividend reinvestment feature off and allow the dividend payments to accumulate in a cash account until I’m ready to invest in a new company.
And of course, much, much later down the road I plan to live off of these dividends, or at least let them supplement a part-time income.
Once you receive that first dividend payment it is sort of like getting a fever – you instantly want to see that dividend payment go up the next quarter.
If the company increases their dividend the next time one is declared, I might even earn a raise.
Reinvesting Dividends to Compound Earnings
Since I am reinvesting dividends, the payment will go up even if the company does not increase their dividend, thanks to the magic of compounding.
My initial 80 shares of JNJ purchased another 0.722 shares, so I now own a total of 80.722 shares. If the dividend amount stays the same the next time it is declared, I will receive a payment of $46.01 – $0.41 more than the first payment.
Again, this doesn’t sound like much, but apply the same calculation over and over for many years, and that snowball is picking up a lot of snow every time it rolls over.
When you factor in dividend increases, something many companies I invest in have done consecutively for the last 25+ years, the opportunity to build wealth with dividend stocks is there.
This first dividend payment has inspired me to work even harder to pay off our mortgage early so that I can use more income to grow our portfolio of dividend stocks.
Disclaimer: Long JNJ