Why dividends always beat a salary

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I had a small taste of what it would like to be a fully fledged Dividend Tycoon recently. My Mother, who lives in England, came to visit me in Cape Town for three weeks. It was a special time for me as she has not been here for over 10 years, and it is not always easy to go there. My girlfriend also had some leave so we were all able to take a holiday together within the three weeks.

Me on holiday
Me on holiday

During the three weeks my Mother was here I did not do very much work, mostly I kept up to date on my portfolio stocks and made some minor trades when the opportunity looked too good to pass. I always kept up with my reading however, as this is a crucial part of becoming a better investor. This enabled me to spend a lot of time going for walks, swimming in the sea, taking drives, going for coffee and going away for a few days. Now had I been earning a salary I probably not have been able to get the leave, and certainly would not have had nearly as much time to do these things while my Mother was here. I would most likely have come home tired and late from my job.

Now, do not get me wrong, I have to work especially hard this month to make up for the time off, I am not completely independent, but I did have some dividends come in from my South African stocks which meant I had a cushion to pay the necessities, and some savings covered the rest. The point is, that those dividends were the key to me being able to take the time off, and I did not have to sit in an office all day so that I would receive my salary at month end.

In other words, I was not working, but my stocks were. I had people making and serving burgers at Burger King on my behalf (through the company that has the South African license for Burger King), I had people running a hotel on my behalf (through a small cap hotel group I have stocks in). I did not have to do any of the work involved in these and other businesses, but as a stock holder I am entitled to my share of the income, and receive part of that as a dividend.

Burger King staff at a new branch in Cape Town
Burger King staff at a new branch in Cape Town

I will write a future post on some of these businesses as I believe some are world class despite being based in a developing country.

So this is why I say I had a taste of being a fully fledged Dividend Tycoon, and it does feel great. It has made me more motivated than ever to be able to not worry where the next bit of income is going to come from. I still rely to some extent on short term trading opportunities in order to generate income, but I am very focused on building a portfolio of dividend paying stocks which will work full time for me. I have been focused on this for some time in South Africa and have made good progress, but the aim of this site is to obtain this level of freedom with international stocks, that journey has only just begun though. What I have learnt over the last few weeks however, is that having time to spend as you wish, with the people you want to spend time with, is priceless and worth striving for.

2 thoughts on “Why dividends always beat a salary”

  1. I am assuming that your mother’s visit and holiday was a special event and usually you would re-invest the dividends? The real effect of compounding dividends is only achieved through reinvestment.

    1. Thanks for the question SW. I think in an ideal world all dividends would be re-invested, but this was certainly a special and rare event. I think it is important to also remember why we strive to reach financial independence, and for me it is about having time to do things that are important to me, with people that are important to me. The memories from that holiday will beat any future dividends lost, and unlike a stock, I can never lose them. Balance is important in life and as long as you maintain your focus and discipline on achieving FI, it is ok to deviate from the rules here and there, especially when it is something important to you.


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