Why I Love Dividends

I really do love dividends as what is there not to love as you wake up one morning and an email or letter arrives telling you that …. company has just paid you. Really is passive income that everyone talks about.

Also you can choose if this is a cash payment or if they have a dividend reinvestment plan to simply purchase more shares on your behalf without having to pay any extra fees.

Many of the top blue chip companies on the Australia stock exchange offer dividend yields around 5% and are franked so a 30% company tax has already been paid which gives you a tax credit for the dividends you receive.

So is a lot better return then the 2-3% you will get from a term deposit or savings account with the major banks.

It is expected that over the next 5-10 years that dividend payments will make up half of the investment return.

Maybe it is an Australian thing as the average company listed on the ASX pays out 75% of profit as a dividend. This is much higher than some other countries such as UK based companies only paying out 49% of profit as a dividend.

The other reason why I love dividends so much is that it fits in very well with my goal of financial freedom. I’m looking to slowly increase my annual dividend payments over time to the point where I can simply live off my dividends alone without having to work.

So below is the passive income I have made from dividends over the last few years:

End of 2009 financial year: $2136

End of 2010 financial year: $2830

End of 2011 financial year: $6463

End of 2012 financial year: $7353

End of 2013 financial year: $6868

End of 2014 financial year: $12,527

End of 2015 financial year: $12,847

*Above is from dividend payments including franking credits and the interest earnt from a very small amount of cash kept in savings accounts (Normally used before purchasing my next lot of shares)

At the end of this financial year I’m targeting to achieve over $15,000 in passive income.