I wish I had a dollar for every time I read some advertorial about side hustles or claims of “easy” passive income to pay your bills. Do you know how many hours of surveys you actually have to complete to get a $25 gift card? Most of the so-called “passive income” schemes I’ve seen require a lot of your time. Last I checked, that wasn’t the definition of “passive.”
Over half of Gen Z and Millennials have a side hustle or some kind of gig work to supplement their income. The numbers show that nearly two-thirds of workers are living paycheck to paycheck.
Now don’t get me wrong. There were some years in my 20s when I wasn’t working full-time in the publishing business. I was teaching yoga as my main gig to cover the high cost of living here in South Florida.
So, I worked in retail part-time for a little bit. I would pick up odd sewing jobs, write freelance articles, and I did some DJing. I was even an Uber driver at one point.
I’ve got some interesting stories from those days. At the end of the day, it was a lot of hours for just ok money, but it kept a roof over my head. What can really make a difference is passive income. Making money while you’re doing something else.
The Grass Looked Greener
Dividends aren’t anything new. The Dutch East India Company started paying dividends to its shareholders in 1602. We all know that Warren Buffett is a champion of dividends. And John D. Rockefeller famously said, “Do you know the only thing that gives me pleasure? It’s to see my dividends coming in.”
But during COVID, dividends fell out of fashion for some people as several things happened at once.
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Dividend cuts were announced as companies struggled to adapt to lockdowns as quickly as possible. There were $220 billion of global dividend cuts in 2020, a decline of 12.2%!
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Higher interest rates were a welcome relief from the zero-interest world we had come to know. With CDs and other cash-like alternatives actually paying a competitive yield—and uncertainty about a rocky stock market—investors moved some of their money out of dividend stocks and into these alternatives.
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Interest in tech jumped to the front of everyone’s mind. Mass shutdowns and social distancing turned our attention to contactless technologies, especially those that allowed companies to work seamlessly with their quarantined employees. Then supply chain shortages reminded investors how integral our tech building blocks actually are to everyday life.
We’ve already seen a reversal of dividend cuts as global corporate dividends hit a record $1.66 trillion last year. Fed chairman Jerome Powell keeps insisting that interest rate cuts will come sooner rather than later. And anyone who can do the math knows that tech stocks have reached insane valuations.
It’s only a matter of time before income investors remember that solid and stable dividends are still here for them.
Grab Neglected Stocks Now
It’s always good to remember that as stock prices go down, yields go up. The reverse is also true. As dividend stocks were ignored, their share prices were stuck at levels similar to 2019… and some dropped even lower. This all happened while many companies continued to pay and even raise their dividends.
Some of us never lost faith. For us, that meant the opportunity to lock in some yields on stock I never could have imagined over the past two years. But there is a sense of urgency to grab these now before it’s too late.
I’m generally perpetually bullish on the markets, especially the stocks that I recommend. But we have to see some sort of pullback. I’m not saying it has to be a full-blown market correction. However, certain sectors will see a period of cooling… and other sectors will move back into attention from their forgotten status.
The catalyst for this to happen will be when interest rates start to go down. By next year, a lot of the great dividend companies will be paying yields where I just can’t justify owning them. I firmly believe that you deserve at least a 3.5% yield on your money. I stuck to this standard even when interest rates were near zero.
To me, it really doesn’t matter what happens in the market overall. My strategy works in any market. So, start thinking about setting up your dividend streams so you can escape those side hustles.
True financial freedom is achieved from passive income. As always, to get my latest investment recommendations, check out my Yield Shark newsletter with a 90-day money-back guarantee. And the must-have companion to Yield Shark is this year’s Strategic Investment Conference, our 20th-anniversary presentation. We have assembled a lineup of the most sought-after thought leaders and market masters. You can see our roster of presenters and featured sessions here.
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© Mauldin Economics
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