How I Got Started with Dividends

I don't really use this blog for personal stories, but I figured I'd make an exception here. Dividend journeys aren't mainstream. You don't hear about them in the news, or on social media, or even learn about them in school. 

The Crazy Old Janitor

My first exposure to the concept of dividends was in my boss's basement. I was 19 years old, in art school and working on the side as a grunt for a local potter in Cleveland. She had a basement studio where I spent a few hours a week pounding out 25 lb blocks of clay and making pots on the wheel. I made about $60 each week, which was a lot of money to me.

My boss was a chatty older woman who loved to tell stories. One story she told me was of a man she knew who recently passed away.

"He was a janitor all his life, and he lived in a storage unit," she said. "And he died a millionaire. Nobody knew. Some people spend their money on drinking or gambling, not him. He spent his whole paycheck on McDonald's stocks. And McDonald's sent him checks in the mail every few months. Dividends. He'd just cash those checks and buy more McDonald's stocks. So the checks got bigger and bigger."

The story stuck with me, but I didn't think too much about it. I didn't really know what dividends were or why McDonald's was sending this crazy old guy checks. And living in a storage unit didn't sound appealing.

A Peek at the Corporate Financial Statement leads to a Case of FOMO

Five years later, I went back to school for accounting when I couldn't find a job with an art degree. 

Learning about dividends and how they worked was part of my intro to accounting class. I learned that dividends were corporate profits sent back to the shareholders in the form of cold hard cash. 

Learning to read financial statements was a part of being an accounting major- and dividends are a part of accounting statements. Looking at GE's 2012 financials during a class exercise, I saw the number on the "Cash Returned to Investors" line- 12.4 BILLION DOLLARS. That's $12,400,000,000.

Somebody got that money. Maybe it was some janitor in a storage unit. Maybe it was some rich guy on a yacht.

That was the moment I decided- I wanted a piece of that. Even if it was just a couple bucks, I didn't care. 

At the time, like any normal 24 year old, I was spending my money on normal 24-year-old things: bath bombs, dollar store lipsticks, clothes, snacks, and so on. In hindsight, I wasted so much money on Chipotle I want to kick myself. Yet, during those days I couldn't think of a better use for my money if I tried. But after seeing that financial statement from GE, it became very real that any money I could keep from spending wouldn't just be there for me to spend later. It would be generating extra money.

In 2012, I opened up an account with Scottrade (who have since been absorbed by TD Ameritrade.) I was working as a junior bookkeeper / retail clerk at a garden shop at the time for $10/hr. I had moved back in with my parents and was commuting to college. It took me a long time to scrape together the $500 I needed for a minimum deposit. Chipotle was out. I ate a lot of peanut butter. 

Then I opened up the account.

It wasn't a retirement account. In hindsight, it should have been a Roth, but I didn't know any better at the time. Still, just by taking that step I was starting an important journey.

Baby's First Dividend

After some research, the first stock I bought was Verizon. I could afford just a few shares. 

I'll never forget the feeling of my first dividend payment. It was only about six dollars, but I felt like a tycoon. I didn't get a check in the mail like the crazy janitor, I got a direct deposit into my account.

I sold my Verizon stock when I moved to NYC and my student loans came due. I didn't know about emergency funds. My student loans made it really difficult to have any extra money left over to invest. I was babysitting and working odd jobs. I was still below the poverty line. My dividend account never made it over a hundred dollars, and I kept having to drain it during rough months. But my dividend dreams didn't die. 

Don't Stop Believing

Eventually I found a real job in my field that paid a living wage. It wasn't even a middle class wage, especially in my high cost of living area, but I was finally on the right side of the poverty line. BP and Conoco Phillips were my first two stocks I bought after starting my new job. I also learned about emergency funds and made one of those. 

2018 is the sixth year of my dividend journey. Sometimes, I think that if 24 year old me saw my dividend journey today, she'd think it was an unreachable goal. But if you spend six years on anything, it's going to grow. If I could talk to myself from six years ago, here's what I'd say:

"Hey me. Don't give up on your dividend dreams. You're not going to be making $10/hour forever. Focus hard on climbing out of debt and making an emergency fund before you start with the dividend account again, but don't give up on it. It's OK to start small! Oh, and stop eating Chipotle so much."

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  1. I’m glad my first visit to your blog was for a personal story - they’re the only reason I continue to read any money blogs so I hope you plan to do more of these. I first started investing in 2009 but I can’t remember when or how I learned about dividend investing, had to be some time from that year in through maybe 2011. It’s been nothing but dividend stocks since though I didn’t have the money to invest much until around 2014. But boy I’m glad we’re building our assets this way.

    1. Revanche, I've been enjoying following you on twitter but I had no idea you were a #DividendFriend! Like you it took me a long time to scrape together enough to invest, but I'm also glad to be building assets this way.