Reader Mailbag: “I want to build steady investment income, enjoy retirement, and leave something to my children…”

Dear DTA,

I want to build steady investment income, enjoy retirement, and leave something to my children. I’d also like to do some good for my community.

-Lewis B.

Thanks for taking the time to write in, Lewis.

We love hearing from our readers. And we love doing what we can to help.

You have some really solid goals here.

The great thing about your goals is that they’re somewhat complementary to each other.

And I believe it’s possible to accomplish all of your goals, simultaneously, by following a long-term investment strategy that holistically incorporates certain aspects necessary to make this happen. 

That’s because there’s a fantastic investment strategy out there that can generate growing passive income that can be used for all of the purpose you’re interested in: investment income, early retirement, a legacy, and philanthropy.

In fact, I’m personally using this investment strategy to more or less accomplish all of the same goals as you (although I don’t have children).

That strategy is dividend growth investing.

This is a robust and powerful investment strategy that can allow one to generate the growing passive dividend income necessary to accomplish many different things in life.

I can tell you that I used it to radically change my life.

See, I was worth less than zero dollars just a few years ago.

How can one be worth less than zero dollars? 

This happens when the amount of debt you carry exceeds the amount of your assets, meaning your net worth is below $0.

But this realization motivated me to turn it all around.

And so I made a number of lifestyle changes that allowed me to save more money, which I could use to invest.

These lifestyle changes included: moving across the country, selling my car (and riding the bus), cutting cable, and almost completely avoiding restaurants.

Just a few examples here, but you can see what I mean.

I started to save more than half of my net income every month.

And I invested this capital into some of the best businesses in the world.

Dividend growth stocks represent equity in businesses that are paying their shareholders regularly rising dividends.

Well, a business that can pay its shareholders ever-larger dividends, year in and year out, is often a fantastic business. 

You basically cannot run a terrible business while also writing these checks to your shareholders that are getting bigger every year.

If you want to see what dividend growth stocks look like, just take a moment or two to peruse David Fish’s Dividend Champions, Contenders, and Challengers list, which is an invaluable collection of more than 800 US-listed stocks that have paid their shareholders rising dividends for at least the last five consecutive years.

You’ll notice a number of blue-chip stocks on that list.

Think McDonald’s Corp. (MCD), Apple Inc. (AAPL), and United Technologies Corp. (UTX).

These are companies that make the world go ’round.

Like I said, it takes a special kind of business to write bigger checks, year in and year out.

I used the combination of a high savings rate and the power of dividend growth investing to build the six-figure dividend growth stock portfolio I now own and control.

This is real money here. This is my real life.

This portfolio thus generates real-money passive income that I use to pay my real-life bills.

And we’re talking about five-figure passive dividend income here.

Better yet, because of the nature of these businesses I’m invested in, the odds are quite strong that this investment income will only continue to grow over time, allowing me eventually leave quite a legacy to the world.

You can also see, based on the time line I’m giving, that it didn’t take that long to accomplish all of this.

I’m sharing this information with you to show you that dividend growth investing can help you with everything you’re looking for.

Passive dividend income that’s funded by some of the best businesses in the world – passive income that’s organically growing – can fund a retirement, be left to children, and help the community around you.

It can do all of these things. 

And it’s not particularly difficult to put yourself in that kind of situation.

Because of the nature of growing dividend income that can be accelerated via dividend reinvestment – one is reinvesting growing dividend income, increasing the amount of dividend income that’s organically growing at the same time – a snowball of wealth and passive dividend income can come about rather quickly.

One just needs to make sure any business they’re investing in is within their circle of competence. You want to make sure a company passes a quantitative and qualitative analysis. The risks should be acceptable. And the valuation paid at the time of investment should be reasonable.

These steps are fairly straightforward, especially once you become comfortable with investing in high-quality dividend growth stocks.

We even have resources that break these steps down.

Fellow contributor Dave Van Knapp sought to educate prospective investors on all things dividend growth investing via his dividend growth investing “lessons”.

This is a series of articles that describe, in detail, exactly what dividend growth investing is, why it’s so fantastic, and how to implement it in one’s real life.

And then if/when you’re ready to actually invest your own hard-earned capital toward your goals, I highlight what appears to be a compelling long-term dividend growth investment idea every Sunday, as part of the Undervalued Dividend Growth Stock of the Week series.

I believe you can accomplish all of your goals, Lewis. And I believe all of them can be worked for, simultaneously.

I say that because I’m essentially doing the same thing. In fact, I’ve been doing the same thing for a few years now. And it’s thus far turned out to be a very successful venture.

But the key, as always, is to get started toward your goals immediately. 

I wish you luck and success.

Jason Fieber

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Disclaimer: Jason Fieber is not a licensed financial advisor, tax professional, or stock broker. Please consult with a licensed investment professional before investing any of your money. If your money is not FDIC insured, it may decline in value. To protect the privacy of our readers, any names published in this article are under aliases. In addition, text may be edited, omitted or paraphrased for grammar or length.