Dividend investing is something I have been toying with but after comparing it with alternatives, I decided not to put any serious effort into it. This article will reveal why I think niches sites are so much better for folks looking to build multiple income streams for their early retirement.
I disclosed in my previous post that my current amazon monthly earnings is about USD200. That is achieved with a minimal spend of about USD400. With a USD400 investment into buying domains and outsourcing the content, I managed to create a portfolio of sites that are pulling in USD200 per month. If I do a calculation using annual returns, we are talking about 600% returns.
Compared this with dividend investments. I have no personal portfolio so I took the number from a Singapore blogger called Dividend Warrior who had posted his dividend earnings. Specifically, in his Dec dividend update post, he has reveal his average monthly dividend earnings:
On average, the Dividend Warrior is getting S$746, with a total investment of S$163,794. This translates to a dividend yield of around 6.8%.
Comparing the dividend investment approach and my niche site method, here are a couple of things that I see:
- Dividend investment requires a large amount of capital for the returns to be significant. If you don’t have this amount of money in your bank, then you will need a longer time to accmulate your wealth for the returns to reach the level of dividend warrior. Since what I want is early retirement, waiting for wealth accumulation is not something I prefer.
- The difference in the rates of returns is too wide. My niche sites yield 600% while the dividend warrior’s method yield 6.8%. If I want to reach his S$746 income level, I only need to invest another USD800 to triple my amazon earnings. That high return rates is what anybody looking for early retirement should focus on. The higher your rate of returns, the faster your income level and wealth increases.
- Capital appreciation seems to differ as well. When you are selling an income generating website, the typical valuation is around 8 to 10 times the monthly income. Hence, for my amazon sites, I can sell the whole lot between USD1600 to USD2000. That represents 400% to 500% of my initial USD400 investment. For dividend warrior, his portfolio has risen by 36k on his investment of 163k. That is about 22% assuming the increase came from a single year.
Based on the above, you can see why site building is my preferred way of making passive income rather than investing in dividends. I have no doubt that one can definitely make money in both but the choice for me is to see which one can get me to early retirement.