If you’ve read some of my other articles about where I am personally in terms of finances, you know I’m not exactly “just starting out” or in a relatable position for a beginner investor. Put I want to be able to guide you through my financial journey from start to finish. However, I did just recently open a joint retirement account with my wife which will be our primary retirement savings. So, I intend to share with you every stock purchase we make, the reasoning behind it, and our dividend income that comes from those investments each month.
Our initial investment in this account is a pretty standard starting amount, so if you’re just starting on your journey as well it will be fun to follow along. We’re starting out with an initial investment of $2,500. We bought 5 shares of Exxon Mobil Corporation (XOM), 16 shares of Target Corporation (TGT), and 11 shares of PepsiCo, Inc. (PEP).
Exxon has an entry yield of 2.67% and has consistently raised its dividend distribution for 31 years in a row. Over the past 10 years it has managed to raise the dividend by over 10% each year on average. It’s P/E ratio is 12.21, and payout ratio is about 32%. XOM seems like a pretty safe bet for the foreseeable future.
Target has an entry yield of 2.74% and has consistently raised its dividend distribution for 46 years in a row. Over the past 10 years it has managed to raise the dividend by over 20% each year on average. It’s P/E ratio is 16.79, and payout ratio is about 42%. Target is also actively expanding into Canada, which is lowering the price now due to the decreased earnings, but I believe this reinvestment in the company is going to pay off big time in a few years.
Pepsi’s entry yield is 2.71% and has raised their dividend for the past 39 years. Over the past 10 years, those increases have averaged 15% with a raise of only 5% last year. Their P/E ratio is 19.65 and payout ratio is 51%. Those last 2 statistics are little more risky, but ultimately I see Pepsi’s softdrinks and snacks doing well. I have shares of Coca Cola (KO) in my individual account, so this was kind of a diversification play, but I’m still confident in this purchase.
The important thing to remember is that I’m not buying these stocks because I hope their values will go up (even though they probably will). I’m buying them because their dividend payments are poised to raise each year until I retire. While my 16 shares of TGT will only pay me $6.88 on the next dividend pay date, I can safely expect that payment to go up in the future. I wouldn’t be surprised if my current investment of roughly $1000 is paying out $144 each year by the time I retire.