A business partner of mine was in touch recently to ask me about the FIRE Revolution income strategy. His question was: “Given the press is reporting many big firms are thinking of not paying dividends – How does this affect your strategy?”
That’s a great question. The crash we have just been through was unprecedented in its speed and severity and there is no doubt that the drop in many shares will have hurt investors across the board. I strongly believe that a well-diversified portfolio will have held up reasonably well and the recent market rebound has certainly taken the edge off the initial falls. However, there is no doubt that income investors who rely on dividends have been hit with a double whammy. Not only have their stocks fallen in value but in many cases, the dividends they rely on have been pulled as well.
However, followers of the FIRE Revolution strategy have far less to fear in this regard than regular buy and hold investors. You see, we receive up to four different income streams from our investment campaigns and dividends are just one of them.
Remember that we enter our positions using ‘buy low’ contracts and that action brings in the first income stream. Then, once we own the shares we have the opportunity to pick up any dividends that are paid. That’s the second income stream. And at the same time, we use ‘sell high’ contracts to exit our positions and that brings in an additional stream of income before we hopefully finally sell our shares for a profit. That’s the fourth income stream.
So, although it’s certainly unfortunate to temporarily lose the dividends, we are very well placed to continue generating multiple income streams from the contracts we sell. In fact, they are often described as ‘Instant Dividends’ because you get to select the amount you wish to be paid and it lands in your brokers account a day later. Now that’s a whole lot more rewarding than waiting for your favourite stock to start to pay regular dividends again.