Whenever you request guidance on how to invest to reach FIRE, you will often receive the comment you should invest in Emerging Markets e.g. through IWDA + EMIM. But should you?
Post contents hide
2 My top picks
Last Updated on October 11, 2020 by Mr. FightToFIRE
Dividend-paying stocks? As a Belgian? Am I going mad, paying 30% to get cash instead of having it accumulate?
Hear me out. Getting money for doing nothing sounds awesome, right? That’s what I think at least. It gives me a nice feeling knowing I get money deposited on my (investment) account for doing nothing myself1. This is the main reason for getting dividend stocks: seeing my investments provide an income on a monthly basis.
I know myself. If I see no results in any form of payout, I think about how my investments are doing on an almost daily basis. This inevitably results in me doing stupid things like buying or selling my shares at the wrong time, i.e., buy after a rally or sell when it’s bottoming out.
I do have to note that as of this year, I can recuperate the 30% withholding tax of up to €640 of dividend payouts. In other words, up to € 192 of tax and next year, it’s €800. So at least until I reach €640 I will buy dividend-paying stocks. This is limited to company stocks. Trackers are excluded. For this reason, I will focus on getting REIT and investment companies though I won’t exclude ETFs completely because especially SPYW also performs very well in general.
The basic premise of FIRE is to save up a sizable nest egg where you can withdraw 4% per year from. To achieve this the simplest rule to follow is to have at least your yearly expenses multiplied by 25. If you reach that amount of cash and have it in a portfolio that returns 6% on average, you are set for early retirement.
This is already straightforward, but for me, I’m missing the feeling of gratification that a dividend payout gives.
My top picks
These are the reasons why I’m looking to get some of the best european dividend stocks this year. The following list doesn’t have a numbering because I don’t have a fixed order in which I want or will buy them. My focus will be on Belgian companies due to the new Belgian withholding tax law that exempts Belgian or foreign company dividends up to € 800.
Dividend yield: ~3.10%
Dividend yield: ~4%
Dividend yield: ~5.8%
Dividend yield: ~1.17%
1 Yes, I know it’s not completely correct stating I didn’t do anything myself. I earned the money doing an IT-job and then bought a stock with said money. I mean, not doing anything to get the dividend.
With the above selection, I will have a good dividend payment schedule throughout the year and I’m diversified though with a more pronounced weight for Belgium due to the REITs and the investment stocks. These stocks, in turn, do invest outside of Belgium, so it’s still diversified.
There is some overlap between the ETF’s and the individual stocks as you can see in the following image (made using Morningstar X-ray). The table reads as follows:
Name – Weight in position (%) – Weight in portfolio (%) – Country – Portfolio date
(more text after the image)
The next steps
With my selection in place, I still need to consider what to buy first and for how many. Since I aim to get 200 EUR in dividends this year I want to get the highest paying ones first that are also eligible for the tax reduction.
When it comes to how much to invest in them that’ll be more tricky. I plan to deposit (at least) 12,500 EUR, but how much of that amount is for the dividend stocks, is hard to say since I also want to increase my accumulating ETF positions. It’ll probably look something like this:
- GIMB (~ €750)
- AED (~ €1,500)
- WDP (~ €750)
- SOLB (~ €750)
I think this should be a good basis to start from. We’ll see how 2019 progresses of course but I’d like to start with getting the aforementioned 4 dividend stocks first.
do you have any favorite dividend-paying stocks? If so, please let me know, or if not, why? You don’t face my (psychological) issue 😉 ?