Tag Archives: dividend stocks

Paying A Kid’s Allowance With Dividends From Stocks

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First, I made a mistake!  I now wish I would have put the money I’ve been saving for my kids into a stocks that yield a dividend instead of a UMGA account for them once they turn 21! 

Then continue to invest money into a dividend stock ($125 a month) or dividend paying mutual fund, while using the dividend to pay for my kid’s allowances!  See the crude table I created below:
Dividend Pay % 4.00%






Weekly
Age
 Contribution Dividend Total Savings
Allowance
1 1500 $30.00 $1,560.00
$1.15
2 1500 $92.40 $3,122.40
$1.20
3 1500 $154.90 $4,747.30
$2.40
4 1500 $219.89 $6,437.19
$3.65
5 1500 $287.49 $8,194.68
$4.95
6 1500 $357.79 $10,022.46
$6.30
7 1500 $430.90 $11,923.36
$7.71
8 1500 $506.93 $13,900.30
$9.17
9 1500 $586.01 $15,956.31
$10.69
10 1500 $668.25 $18,094.56
$12.27

The advantages of such a system would be as follows:

  • It could be used as a stealth emergency fund(s).  So if I were to lose my job, we would still be able to eat…
  • I would still have control over the money instead of my kids once they become the age 21 (or 18 depending on the state), like they do with their UGMA accounts.
  • Someday, when my kids are  looking to buy a house, I could give the money to them for help with the down payment.
  • Or I could use the money to help pay for college costs.
  • I could even be cruel and decided to keep the money for myself.  Look out Hawaii, here I come!!!

The points above are excellent reasons why just buying stock with dividend in my own name is better than their names!

After some reasonable success with my Lunch Experiment, I’ve been wanting to create new stock dividend fund anyway!

The key to such a “Kid’s Allowance” stock dividend fund would be to start saving for the fund very early.  Perhaps even before the child is born!  And of course to continue to keep putting money into the investment each year!

What say you?  If you were newly married, would you consider creating such a fund now?  Perhaps buying a great monthly dividend stock like Realty One “O”…

-MR

Dividend Stocks, Lunch Experiment Update #4

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It’s time for my Dividend Stocks Update on my Lunch Experiment!

For the first 2 stocks in my experiment, I borrowed money from my checking account so I could seed the money for the initial investment.  But since I fully paid myself back on the first two stocks (ANH and EVEP), I decided to take borrow more money from my checking account so I could purchase some shares of another dividend stock. 

This time I chose a dividend stock called Chimera (another REIT).  It’s dividend yield is a ridiculously high 17%.

Initially, I was only going to borrow $1,000, but I decided to bumped the amount up to $2,000. 

Since I’m getting money from my other dividend yielding stocks for lunch, I decided to bump up my weekly savings rate to $60.  So I should be able to pay myself back in less than 33 weeks (sometime in mid-May 2011).

Here is my Dividend Stocks for my Lunch Experiment Spreadsheet:

Stock Name Anworth EV Energy Chimera
Stock Ticket ANH EVEP CIM
# of Shares 260 45 600
Orig. Price $7.84 $23.25 $4.01
Curr. Price $7.16 $34.26 $4.14
Orig Cost $2,038.14 $1,046.25 $2,404.80
Curr Value $1,861.60 $1,541.70 $2,484.00
Annual Yield 13.87% 8.85% 17.27%
Dividend / year $258.20 $136.44 $428.99
    Total Dividends $823.63
    52 weeks 52
    Dividend / week $15.84

 

Overall, I’m pretty please with the outcome of this experiment, but now let me explain some things about my experiment:

  • The money used in this experiment is basically “Free Money” because it would have been spent on lunch going out with the guys!
  • Since it’s “Free Money“, I can afford to lose it all of it if it came down to that!  Yes, I would cry a bit at first, but its money that would have been wasted on eating out anyway.
  • Since I can afford to lose this “Free Money“, I can take risks that I normally wouldn’t take.  I usually don’t recommend anyone buy a stock with a 17% annual return.  This dividend yield will come back to earth eventually!
  • This is purely for fun, that’s why I call it an experiment 🙂

And now for some interesting facts about my experiment results:

  • EVEP is up almost 50% from where I bought it at!  To bad I only bought $1,000 dollars worth.
  • ANH is down 8% from where I bought it at!  To bad I bought $2,000 dollars worth of this stock (booo)
  • CIM recently raised it’s dividend payout for the quarter by 1 cent.
  • The guys try to convince me to go out to eat with them more, but I’m content on doing the library thing.  Occasionally, I’ll go with them for sushi!  Sushi is my kryptonite when it comes to eating out…
  • I get a huge kick when I see the dividends hit my online brokerage account. 
  • Yes, I am nervous about the tax cuts expiring though!  Perhaps I’ll have to move my lunch experiment to my roth ira account…
  • Doing a real documented experiment like this has been a great experience!

I’m having a great time with this experiment, so far I figure that if the dividend yield rate stays the same (which is highly unlikely), I would be able to go out to lunch twice a week with the guys! 

Ironically, I no longer have a desire to go out to eat at lunch and spend so much money.  In fact, now I mainly go to the library at lunch and read other personal finance blogs and work on this blog!

What do you think of my lunch experiment and my progress?  Do you think I’m crazy for going with such a high stock dividend yield?

-MR

 

Related:

Check out the next update in my Lunch Experiment, #5.
Or go back to the previous update via my Lunch Experiment #3.