The Either-Or View – I can’t have my cake and eat it

I want my cake and I want to eat my cake and share it too.

Some investors think poorly of investments that pay a dividend. There are good reasons for this view, and they aren’t totally without merit. Others, especially as they move from the active working years to retirement, view income as important. Obviously, if you aren’t earning a paycheck, reliance on Social Security as your only source of income is a fool’s path to bankruptcy. There are investment professionals who specialize in helping investors move from the investment growth path during their working years to the income-producing path in the retirement years. Is this really the only choice?

The Two-Cake View

I subscribe to the I want my cake but only if I can eat it too and then keep my cake to eat it again and again. Wikipedia says, “’You can’t have your cake and eat it too’ is a popular English idiomatic proverb or figure of speech.” “The proverb literally means ‘you cannot simultaneously retain your cake and eat it’. Once the cake is eaten, it is gone. It can be used to say that one cannot have two incompatible things, or that one should not try to have more than is reasonable. The proverb’s meaning is similar to the phrases ‘you can’t have it both ways’ and ‘you can’t have the best of both worlds.’” That is faulty thinking when it comes to investing.

Where Did I Used to Get Cake?

During my working years I had to sacrifice hours under my employer’s direction to get a piece of cake. Cindie and I would eat most of the cake and set some aside for the future. We also gave some of the cake away. But the days of receiving a paycheck ended. This was God’s way of opening up opportunities to serve our friends, family, church family, and community in different ways. But, surprisingly, the need for unlimited cake (chocolate if you must know) for expenses, gifts and large purchases did not end when my information technology career ended.

Where Does Today’s Cake Come From?

Two words: Dividend Growth. Even better: Dividend Growth Based on Growing Dividends. About ten years ago I realized that I did not have to sacrifice investment growth to get the dividend cake. I started researching investments that paid a dividend. It didn’t take long to realize that companies that pay a dividend can also growth. And the growth can be incredible.

Using a tool like the iPhone Dividend Tracker, I can see the cake that is coming into our retirement accounts. This is cake we receive without selling any of the dough that is baking to create more cakes. In other words, the investments keep rising and the dividends keep rising. We do have our cake and we eat it too. This year our giving to ministries increased dramatically, we purchased a new car with cash, we did a half-dozen home improvement projects and we didn’t sell any investments and didn’t take out any loans. We have our cake, with thanks to God, and we eat and share our cake, because God has been gracious.

Dividend Tracker Screen Shots

Here are some Dividend Tracker views of our actual and projected dividend income for September, for the coming months and estimated annualized income.

These are our December 2020 Paydays – more cake almost daily.
Some months have more cake than others.
Some of this income is from ROTH accounts = no income taxes!