5 Questions with Dividend Mantra

June 30, 2015
Jason Fieber, proprietor of the popular investment blog Dividend Mantra, is an inspiration to thousands of people.  In real time, Jason reveals exactly how he earns, spends and invests his money all with an eye toward becoming financially independent as quickly as he can.  Jason flips the standard investing paradigm on its head - he doesn't care one bit if his stocks go up or down, he's strictly focused on receiving a reliable and growing stream of dividend checks that he can live off of one day.  His common sense approach to investing is featured both on his blog as well as his best-selling book The Dividend Mantra Way.  Jason was kind enough to give us a few moments of his time so we can understand his philosophy on life and approach to investing a little better.

1)Tell us about your background and the journey you've been on to get where you are today.
I found myself broke and generally unhappy in early 2010. Well, I was actually below broke. My net worth was around -$20,000 at this time (due in large part to student loans). I like to say that I was worth less than a baby, which, at 27 years old, is pretty disappointing. 

But I got my act in gear. After being let go from my place of employment in Michigan in spring 2009, I moved 1,200 miles away to Southwest Florida to take advantage of no state income taxes, higher income, less expenses, and better weather (which would later make it easier to live without a car). I landed a job in the same industry I was used to (the auto industry) paying about $40,000 per year and I slowly started to save a little money. 

I opened a brokerage account in January 2010 with $5,000, which was just about all I could muster at the time. I bought a mutual fund and a few stocks, but I sold out of everything after a month or so. I realized I didn't know what I was doing, so I decided to take the time to study investing, financial statements, business, the habits of successful investors, and the broader topics of personal finance and achieving financial independence. 

After a couple months of this research, I started down the path I'm still on. I decided to save at least half my net income and invest this excess capital monthly into high-quality dividend growth stocks. My portfolio is now worth approximately $200,000 and should spit out around $7,000 in dividend income this year. And I did all of that on a pretty modest income - maxing out at about $60,000/year in the auto industry after years of climbing the corporate ladder. So I think incredible things are possible for middle-class Americans that really want to make a change. And I only say that because I've done it.

2)If I recall correctly, your goal is to reach financial independence by the age of 40 - despite never having a high paying job.  How is that possible?
There is so much abundance here in a first world country like the United States. The problem isn't a lack of money or wealth, but the fact that wants can be insatiable. I think it really depends on what you want and what you view as sacrifice. I used to get emails asking me how I could sacrifice so much and be happy. But what is sacrifice. Is sacrifice living below your means or working for most of your life? I'd argue it's the latter. And in that regard, it's obviously then not that difficult to live in a modest apartment, get around by public transportation, and enjoy the simple pleasures in life. Time is by far the most valuable commodity, in my view, and it's disappearing for us every day. 

So my answer is to really figure out what you want in life. The practical and tactical side of living below your means is easy, but it's the psychological effects that can be difficult to deal with if you think a big house that you never see because you're working all the time will make you happy. 

But it's not how much money you make. It's really how much you save. Earning $200,000 per year, but spending $190,000 annually means you'll never be financially independent. But if you can make, say, $40k and get by on half of it, you'll probably be free in about 15 years. It's just a function of your savings rate. So I attempt to save at least half my net income and then I invest that in wonderful businesses that pay increasing dividends. Think companies like Johnson & Johnson, Coca-Cola, Chevron, Norfolk Southern, and Wells Fargo. All of these companies are so profitable that they basically can't effectively and efficiently reinvest all that money back into the business. So they send out dividend checks to shareholders. Even better, they generally increase the size of these checks every year, and typically well over the rate of inflation. As such, it's my plan to one day live off of this dividend income, once it exceeds my expenses (which should happen by the time I'm 40).

3)Why do you invest in dividend stocks instead of something like rental property?
It's really just a matter of staying within my circle of competence and general interests. I think one can do well with rental properties, and probably much better than if they were to invest in stocks. But it's apples and oranges. 

For me, I just don't have the desire to scout properties, deal with banks, leverage myself to the hilt, land tenants, and worry about fixing/maintaining properties. The last thing I want to deal with is the proverbial leaking toilet. Coca-Cola doesn't call me when there's a problem with a production line or a retailer. They just send me a check. I like that. 

In addition, I view rental properties as a rather risky strategy to achieve financial independence. It generally involves copious amounts of leverage and you're probably not going to be that diversified. Moreover, real estate isn't very liquid. I'd rather own real estate investment trusts, like a Realty Income Corp., and collect a monthly "rent check" in the form of a hefty dividend and not deal with any of the drawbacks. I might be leaving some money on the table, and I'm okay with that. If I viewed life as a race to achieve the most possible money, I wouldn't be doing what I'm doing in the first place. My time is more valuable than money, and that's partly why I invest the way I do.

4)Why do you favor individual dividend paying stocks over low-cost exchange traded funds?
I think funds can be a great way to invest for a lot of people. But my portfolio generates a higher yield and more dividend growth than any type of ETF that invests the way I do. And I have control: I can avoid the companies I think are poorly run and maximize my exposure to companies I think are high quality. In addition, I'm not going to pay ongoing fees for the rest of my life. I pay commission fees while I'm accumulating stocks, but for the 40 or so years I'll be living off of dividend income, I'll likely be paying little or no fees at all. Even a modest 0.2% annual fee can add up in a hurry if you're sitting on $1 million in assets. And I view valuation as extremely important. Whether it's groceries or stocks, I like to buy when the price of something is below that which it is intrinsically worth. And I'm not aware of any ETFs that focus on valuation. 

So I guess I like the ability to buy high-quality stocks that are priced less than they're worth, collect all of the dividend income and dividend raises for myself, and not pay fees for the rest of my life for the privilege. 

It appears to me that some people think funds are somehow magical. But even the companies in the S&P 500 are chosen by a committee. A fund is just a collection of stocks (or other investments). And you're paying a fee for the selection, in addition to the potential for other drawbacks (which I just listed above).

5)Your frugality is the stuff of legends, what savings tip could we all use to cut our expenses?
My biggest tip is to focus on what I call the "Big Three". That's housing, transportation, and food. That's where most people spend most of their money. I've heard of the "latte factor", and, sure, a wasteful $5 here and there can add up. But no sense in forgoing a daily coffee when your mortgage on a 4,000 square-foot home is sucking up most of your money. 

So live in a modest abode, drive a modest car or no car at all, and skip the weekly steak



This article should not be construed as a recommendation to buy or sell any security. Talk with your financial advisor before making any securities purchases.  Past performance is not a guarantee of future results.

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The Impact of Tesla's Gigafactory 1

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Free Movie Tickets

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I hope no one is actually paying for movie tickets these days, there are some killer deals between this offer right here and the Visa Signature Friday movie offer I wrote about the other day.

To get a pair of movie tickets, buy two items on this list of "Shick" shaving products, put a star next to the qualifying items on your receipt, take a picture of the receipet, send it via text message to 811811 and write properly spelled "SHICK" in the message. Keep that receipt, you might find it useful...
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Class Action Lawsuits - June 18, 2015

June 18, 2015
Not much going on with class-actions lately, but here's one you may be eligible for:
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If you liked this post, join the 1,000+ other daily readers who have signed up to receive free blog posts via e...

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Deals I Like - June 10, 2015

June 10, 2015
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Buy 1 Get 1 Movie Tickets on Fridays

June 4, 2015
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Deals I Like - June 2, 2015

June 2, 2015
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