I just opened a Roth IRA, and am ready to invest in the stock market

[TurboMinivan]

So the company I work for (UPRR) started offering employee stock purchasing plans this Summer, at 40% off current price.

I'm still not sure how I'm going to play my company stock option

For any normal Joe investor off the street (like me), the current $226 share price offers a dividend yield of 1.90%. UNP shows a current five year annual dividend growth rate of 13.15%, which is very impressive. Add in their payout ratio of 43%, and it looks pretty sustainable.

Now let's adjust the math for your special buy-in price. At 40% off, you're currently only paying $136 bucks per share. This gives you an effective dividend yield of 3.15%, which is roughly double the average of the S&P500 in total. This is an excellent deal.

I will probably let it sit for 6 months and see how things are going at that point, then decide if this is going to be long or short term.

Given the above figures, I'd say buying all you can and simply holding it would make an excellent long-term strategy.

I'm already paying 12% into RR retirement, 10% into my 401k and now 2% into stock options. That's 24% of my salary going into retirement/investments.... I think that's plenty.

As someone who is currently paying approximately 33% of my gross income into various investments, I would gently suggest you step it up a bit if you regularly have any surplus money at the end of the month. (But then, I have no idea what your pension actually looks like... and I don't have one of those. Your 24% may be serving you far better than my 33% does me.)

 

[mesha]

I am working toward a goal of how much I make per month in dividends. Right now I am using the drip method and each reinvestment buys the same stock the dividend came from. I am wondering about switching it up and having the dividends paid out in cash and then using that cash to buy the stocks that are trading lower at that point to sort of leverage the money long term.

Thoughts?

 

[TurboMinivan]

I am wondering about switching it up and having the dividends paid out in cash and then using that cash to buy the stocks that are trading lower at that point to sort of leverage the money long term.

Thoughts?

I currently DRIP all my dividends. This is obviously the easy, hands-off approach, and it basically forces you to DCA your way into a large holding over time. Assuming you own quality companies, this isn't a horrible thing... but, you're right--some people instead choose to cash out all of their dividends and selectively decide where to deploy them for maximum value. This strategy requires more work, but it can certainly pay off... at least theoretically.

There are many ways to decide when any given stock is "on sale" and when it is not. For income investors, one easy way to judge is to look at the current yield and compare that to its historical average over time. As a general rule, if the yield spikes way up then the stock is undervalued, and if the yield totally tanks then the stock is overpriced. If you always try to time your entry points and buy at/near the yield spikes, then it might make sense to not DRIP when the yield tanks and instead put that into other holdings which are spiking at that time.

As indicated, this isn't something I do. Besides not wanting to spend all the time required to track each of my 21 holdings, my broker only lets me buy fractional shares if I DRIP dividends. If I instead cash them out and spend them myself, I am only allowed to purchase whole shares (even if it is the holding that produced the dividends). For me, the hassle isn't worth it. YMMV

One more thought: assuming you are a long-term investor, share price at purchase really doesn't matter. After all, if you invest in a quality company, you expect it to do well for years and years into the future. If the company continues to thrive, it only stands to reason that its share price will continue to climb over time. If the price is going to keep increasing, then you are guaranteed to pay more for shares you'll buy in the future compared to what you would pay today. Fifteen years from now, are you even going to care whether you paid $175 or $200 per share in 2021 when the stock is then selling for $800-$1000 a share? Just some perspective.

 

[glockman]

This year for Christmas we decided to open a brokerage account for each of our adult children instead of giving them gifts or cash. I'm looking at what investments to put this seed money in for them. I'm considering ETF's, mutual funds and high yield stocks. Any input?

I currently own some AT&T which is my highest dividend stock. I also have some QQQ which pays a decent dividend.
Both of those being stocks vs a mutual fund that would be a better set it and forget it. WWYD?

 

[TurboMinivan]

I currently own some AT&T which is my highest dividend stock. I also have some QQQ which pays a decent dividend.
Both of those being stocks vs a mutual fund that would be a better set it and forget it. WWYD?

For true set-it-and-forget-it convenience, you cannot beat the simplicity (and return) of a low-cost index fund. You can focus on the S&P 500 by purchasing shares of VOO, or you can choose VTI if you'd rather invest in the entire market instead. Either way, steady investing into either fund will lead to success over time.

AT&T is about to implode as they complete their spinoff. Their dividend will be cut by 50% or more. This is why their share price has been in freefall for the last 6 months--most investors have been steadily exiting their positions. At this point, if you still own $T then I might suggest holding and waiting to see what happens after the split. I think now is definitely not a good time to buy into the company, though. (Disclosure: I am long T.)

 

[I Lean]

It's not a dividend stock, but DocuSign is down BIG the last day or so. On sale!

 

[N-Smooth]

It's not a dividend stock, but DocuSign is down BIG the last day or so. On sale!

I saw that one and was thinking about buying some but my whole portfolio is down and that doesn't exactly motivate me

 

[nnnnnate]

Dang DOMO is down 25% today alone to close at 48.26. I sold at $90 like 6 months ago and made a few hundred. It's been going down the last few weeks after the CEO said something stupid and it got announced that he was under investigation over it... 😳

 

[Greg]

Seems to me like the market is down, my 401k has been hit pretty hard in the last couple weeks. I'm usually making a pretty good return, lately my balance has been going down, rather than up. 😥

 

[jeeper]

If it matters to anyone, I think the real estate market (in Utah) has peaked also.. I am seeing stable or in some cases even declining trends the last couple months.

 

[DAA]

I haven't looked at my balances for six months. I keep an ear on the markets though. Figure it hasn't been a stellar second half.

I'll check them and rebalance sometime this month. Then not look at them again for another six months...

- DAA

 

[anderson750]

About 3 weeks ago my total investments were up about 12% for the year and have lost a big chunk of that this week. I am still on the plus side by about 5% overall for the year so I am not ready to jump off the roof yet.

 

[Greg]

About 3 weeks ago my total investments were up about 12% for the year and have lost a big chunk of that this week. I am still on the plus side by about 5% overall for the year so I am not ready to jump off the roof yet.

I'm 'down' to a 22% return for the last year... 🤔

 

[N-Smooth]

If it matters to anyone, I think the real estate market (in Utah) has peaked also.. I am seeing stable or in some cases even declining trends the last couple months.

Well duh, I just bought a house so of course it did. I’m not actually convinced it peaked. It could easily be a winter slow down.

Seems to me like the market is down, my 401k has been hit pretty hard in the last couple weeks. I'm usually making a pretty good return, lately my balance has been going down, rather than up. 😥

Yup, I’ve been watching it for the last little bit and it’s a bummer. I was a little young in 2008 when everything crashed but now that I’m older I can’t even imagine what it must’ve been like to watch your 401k just get obliterated. I had older coworkers that were FREAKING OUT.

 

[Cody]

I bought into some carnival cruise line two days ago. Hit a 52 week low, have taken on a lot of debt, but I just can't imagine all of those boring people won't start cruising again eventually

 

[nnnnnate]

I remember my dad coming home pre dotcom bust talking about how far up his Cisco stock was every night it seemed. Then the updates just stopped.

 

[glockman]

Yup, I’ve been watching it for the last little bit and it’s a bummer. I was a little young in 2008 when everything crashed but now that I’m older I can’t even imagine what it must’ve been like to watch your 401k just get obliterated. I had older coworkers that were FREAKING OUT.

You shouldn't even care unless you are in your late 50's.

Everything in life is about the long game. Here is my 2 year return on my stock account. That massive drop is the stupid tax I paid on Game stop. Still not doing too bad.

 

[TurboMinivan]

I was a little young in 2008 when everything crashed but now that I’m older I can’t even imagine what it must’ve been like to watch your 401k just get obliterated.

Look at your current 401k balance. Now subtract 40% of its value, and tell yourself that's your new balance. That's what it was like (for me, anyway). But leaving things alone (while continuing to DCA your regular contributions) led to an eventual recovery, of course.

Time and patience routinely make winners of those who play the long game.

 

[N-Smooth]

You shouldn't even care unless you are in your late 50's.

Everything in life is about the long game. Here is my 2 year return on my stock account. That massive drop is the stupid tax I paid on Game stop. Still not doing too bad.
View attachment 143520

Yeah I’m not concerned at all. I would like to retire young-ish but I’m only 38 so I have a ways to go no matter what.

Look at your current 401k balance. Now subtract 40% of its value, and tell yourself that's your new balance. That's what it was like (for me, anyway). But leaving things alone (while continuing to DCA your regular contributions) led to an eventual recovery, of course.

Time and patience routinely make winners of those who play the long game.

Yeah I had coworkers that were 1 or 2 years away from retiring that lost a lot. I can’t even imagine.

My wife’s boss at the time said she couldn’t retire for years due to how much she lost. Yikes.

 

[TurboMinivan]

Yeah I had coworkers that were 1 or 2 years away from retiring that lost a lot. I can’t even imagine.

My wife’s boss at the time said she couldn’t retire for years due to how much she lost. Yikes.

Which are both illustrations of the beauty of a passive income account. The day-to-day account balance is basically irrelevant; so long as the businesses keep generating profits and sharing them with you (ie, via dividends) then you're good. I say that because, now that we're well into December, I can see how my Roth account payout has grown from last year. (My entire goal with this account is to create supplemental passive income, rather than reach any certain total account balance.)

Over the last three months of 2020, my dividend payouts averaged $59.94 per month. (I must take the three-month average since most companies pay dividends quarterly). Way back in January 2021, I set an initial goal to grow that amount to $100/month by the end of this year... but partway through the year, I made a few changes in my holdings to increase my dividend payouts even more, and raised my goal to $110/month as a result. Now that my forthcoming December payouts are all set in stone, I did the math and was pleased to see I surpassed even that higher 'stretch' goal--I've ended 2021 at $123.05 average payout per month. Nice!

I'm already thinking about next year. As always, I am firmly limited in the amount I can contribute to this IRA account. I am setting a 2022 goal of $175/month. Dollar-wise, this is not quite as much of an increase as I managed from 2020 to 2021... which sounds like I'm setting the bar low. However, next year is when the whole AT&T/Discovery spinoff is due to happen, and AT&T will be reducing their dividend when that happens. Many other related facts probably won't be certain until the dust settles (such as if the spinoff company pays a dividend from the start), so I don't yet know how it will all play out. This makes me feel like $175/mo is both a stretch goal and conservative at the same time. Hmm. We'll see, I guess.