Mr. Free At 33

Dividends • Stocks • Investing

What’s A Better Way To Be “Paid Dividends” Than To Actually Be Paid Dividends?

by 22 Comments

I hear this saying a lot.

“It’s paid dividends.”

This is a colloquialism that’s common in our vernacular.

I’ve heard it used for all kinds of things.

Generally, someone will refer to the output of their hard work as the dividends paid.

For instance, a golfer who’s spent 10,000 hours practicing their swing will note that all that work has “paid dividends” when they start winning tournaments.

Or a student who passes a test after studying all of the appropriate material will believe (rightly so) that their studious habits have definitely “paid dividends.”

What’s funny is that I hear about people being paid dividends in the literal sense much less than in the figurative sense.

But what’s a better way to be “paid dividends” than to actually be paid real dividends?

Getting Paid Real Dividends

See, the thing is, there’s no better way to get paid dividends than to actually receive real dividends.

After all, where do you think the saying came from?

Indeed, my Full-Time Fund is set to pay out more than $11,000 in dividends over the next 12 months.

And since most of the stocks in my portfolio are dividend growth stocks – meaning they reliably increase their dividends at least annually – this number is almost sure to be significantly higher this time next year.

It’ll also almost surely be higher the year after that. And the year after that, too.

So on and so forth.

This is before even factoring in dividend reinvestment or new capital investment.

And that’s a major reason why literal dividends are so much better than figurative dividends.

Dividends Keep On Coming And Growing

If that golfer who practiced his swing for 10,000 hours stops practicing, what do you think happens to his/her game? What happens when the golfer gets old? Or retires?

Well, that prior practice certainly stops paying dividends, doesn’t it?

I’m a huge fitness buff, so much so that I’m studying to become a personal trainer. I’ve been working out since I was 11 years old. And I’m always interested in helping others become better versions of themselves, which makes me a happier and better me in the process. So it’s a natural fit.

The similarities between becoming more fit and becoming more wealthy, at least on the surface, are intuitive.

For example, losing weight requires ingesting less calories than you expend. And saving money requires spending less than you earn.

Both are simple concepts to understand at a high level. But both are difficult concepts to implement in everyday life. Otherwise, we’d all be rich models.

Both concepts can also pay dividends.

All that hard work in the gym pays dividends when it comes time to hit the beach.

And all that saving and investing pays dividends when a company you’re invested in pays its shareholders their rightful share of the company’s generated profit.

Well, one major difference between becoming more fit and becoming more wealthy is that money continues to work on your behalf even when you stop adding to it.

My portfolio will send out over $11,000 in dividends this next year whether I save any more money or not. In fact, I could stop saving for the rest of my life, yet I’d still eventually become a millionaire.

However, my body will quickly start to deteriorate (increased fat, muscle atrophy, etc.) if I stop hitting the gym six times per week (as I currently do) and watching my diet.

Money continues to replicate itself, becoming better at the process the more it does it. Muscle, however, will not replicate itself, if left to its own devices. Fat, well… we don’t really want fat to replicate itself, do we?

Dividends can and likely will pay real dividends for the rest of your life, actually becoming bigger and better over time. It’s the snowball effect: a snowball of money, once rolled, will highly likely just continue to become bigger and bigger over time.

But that’s not how pretty much anything else in life works.

And that’s why literal dividends are far better than figurative dividends, which is why there’s no better way to get paid dividends than to actually get paid dividends.

Conclusion

There are many ways to get paid dividends in this life.

You can practice to become a better athlete, which will likely result in being paid dividends when it’s time to compete. You could learn how to play the guitar, which may end up paying dividends when it’s time to impress a date.

There are a lot of actions that pay dividends, some of which are better than others.

Now, investing is just one of my many passions.

However, it’s the one that pays the best dividends of all. There’s just no better way to be paid dividends than to actually be paid dividends.

How about you? Do you enjoy being paid literal dividends more than figurative dividends? 

Thanks for reading.

Image courtesy of: yodiyim at FreeDigitalPhotos.net.

Reader Interactions

Comments

  1. I love to get paid by both kinds of dividends. I work hard and study so that my career can grow. So my time and effort paid Dividend. Since my career is growing, I’m getting paid well. That money I get is being invested to actually be paid in Dividend through my investments. Win win all around.

    Reply

    • FV,

      Definitely. Hard work absolutely pays dividends, as one probably can’t invest capital in the first place without that framework. However, a career usually stops paying dividends pretty quickly if one stops showing up. Meanwhile, dividends just keep on coming and growing. The best dividends of all, indeed. 🙂

      Cheers!

      Reply

  2. Researching and getting started with dividend growth investing paid the most dividend for me. First figuratively (I became smarter on how ‘money makes money’), then literally. My portfolio is projected to generate around 3,000 this year. Next year my goal is 5,000.

    Thanks for the post!
    Tall Investing

    Reply

    • TI,

      I hear you, man. I’ve done a lot of things that have “paid dividends” for me, but nothing quite as powerful and everlasting as dividend growth investing. I can certainly make more money by doing other/active things, but they require ongoing effort. Meanwhile, dividends just keep rolling in and growing, regardless. 🙂

      Thanks for dropping by!

      Best regards.

      Reply

  3. I agree that dividends are the way to go. I happen to be an index fund investors (with a heavy REIT) allocation, and my portfolio is slated to generate at least $25,000 in dividends this year. I was lucky to start investing 5 years ago and even luckier to have a business that was successful in my late 20s. While I am certainly happy with the income, I pretend that it’s not there and continue to work. I feel that regardless of how much income you have, you’ll always want more. It’s exciting to see the amount grow every year.

    Reply

    • John,

      Nice work! Sounds like things have worked out fantastically for you. Hard work often pans out, at least in my experience. 🙂

      I don’t personally “want more”, but I find purpose and value in my work. So I continue to work. I think the math behind early retirement is largely moot because those who are driven enough to achieve early retirement will likely continue to be driven to keep working and adding value, which will naturally translate into economic benefits. But “wanting more” doesn’t really motivate me. Most of my money will be given away anyway.

      Thanks for dropping by!

      Cheers.

      Reply

  4. Nice article, Jason. After giving this a bit of thought I can comment that the unique power of dividends is the compound growth that comes automatically with the passage of time, provided that the underlying business continues to grow sustainably. Very few things in nature exhibit that level of compound growth but there are two other important behaviors that can pay dividends:

    1. Having the right mental attitude (one of positivity, gratitude) in the face of challenges that life throws our way is essential to cultivating more happiness and getting more results. This requires daily practice but by creating the right habit, dividends will automatically be thrown off, but won’t necessarily compound.

    2. Being a continuous learner. Learning and the accumulation of knowledge does compound and allow us to tie together different fields and previously observed patterns to gain an edge. Buffett and Munger are living proof of this, and they both continue to read extensively and continue to build out that edge.

    -Mike

    Reply

    • Mike,

      Definitely. There are a lot of things that “pay dividends”. However, your comment touches on the unique aspects of dividend growth/compounding. A proper mindset, while important, doesn’t compound. Knowledge, while also incredibly important, requires constant honing. Meanwhile, I can sit in bed all day and just let compounding deliver me ever-greater income. Hard to beat that. 🙂

      Thanks for adding that!

      Best regards.

      Reply

  5. Jason, I agree wholeheartedly with you. Actually receiving monetary dividends is the best. I just invested $11,000 over the past two months. That $11,000 will pay me just over $500 in dividends during the coming year. Those dividends will buy more shares giving me even more dividends. The snowball in work.

    Those dividends will eventually allow me more time to work on the figurative ones.

    Reply

    • MDD,

      Nice!

      Those literal dividends will absolutely allow you more time to work on the figurative ones. In a way, they complement one another. It’s just that one is superior to the other. 🙂

      Keep it up!

      Best regards.

      Reply

  6. Hi Jason

    Good concept and refreshing thoughts there.

    There are no better way than to get the hardwork to paid dividends and it translates into actual dividends itself when all the initial hardwork has been done.

    The best thing? Youd get paid rest of your life whichever year its gonna be.

    Reply

    • B,

      Absolutely. Hard work pays dividends both figuratively and literally. If you’re able to parlay that into the literal kind, hard work can pay you for the rest of your life. Once you grasp that, you’re able to turn hard work into smart work. And that’s when things really start to pay off. 🙂

      Thanks for dropping by!

      Cheers.

      Reply

  7. Great point Jason! When it comes to earning dividends, there’s nothing better than the real thing! The ongoing compounding of capital is hard to beat, especially when it comes with a little capital appreciation too!

    Reply

  8. Hi Jason,

    the steady flow of dividends hitting my account is awesome. And now the amounts are relevant, in 2017 dividend income will be around 3500$…and growing in the next years for sure…

    And besides all that, i found my passion with investing and sharing my journey, which is very rewarding. the journey towards FI is so much fun.
    So, dividends play a huge role in my life now…one way or the other.

    Kind regards,
    DividendSolutions

    Reply

    • DS,

      Glad that you’re having so much fun. The journey toward FI is incredibly rewarding. I’m a very different person now than I was back when I first started. Of course, age plays a role. But the flexibility and freedom has definitely impacted me, too.

      I’m sure you’ll continue to enjoy getting paid dividends. 🙂

      Cheers!

      Reply

  9. I was talking to a friend today about my early career, and he noted it ‘paid dividends’. In a long way round, opportunities from that job got me to my previous job, where I got company stock, that does pay actual dividends. 🙂
    My willingness to say yes to opportunities got me each new job, and to where I am in my career, and pay increases meaning I can save more. So it paid off, even without the literal dividends

    Reply

    • Jacq,

      Oh, absolutely. I know exactly what you mean. My hard work in the auto industry “paid dividends” as I shot through the ranks. I started off as a parts driver making around $9/hour. I ended up as a service advisor for Audi making around $60k/year. So my hard work paid dividends. It’s just that once I stop showing up, I stop getting paid (dividends or otherwise).

      With actual dividends, I can sleep in all day and still get paid. It’s the easiest and best job I’ve ever had. 🙂

      Cheers!

      Reply

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