There is one idea I have particularly enjoyed while investing in dividend stocks: connecting dividends to recurring household bills rather than looking only at a percentage yield.
Thinking about a phone plan, internet service, or subscription payment makes a dividend goal feel tangible.
How much would I need to cover a KRW 50,000 phone bill?
Suppose my monthly phone bill is KRW 50,000, or KRW 600,000 a year.
If I invested KRW 15 million in an asset yielding 5% annually, the hypothetical pretax dividend would be KRW 750,000 a year.
Using a simplified 15% dividend tax assumption, that leaves KRW 637,500 a year, or roughly KRW 53,125 a month on average.
On paper, the dividends could cover the phone bill with a little left over.
But this is an illustration using assumed yields and taxes, not a promise of income. U.S. withholding tax, Korean income taxes, exchange rates, and the timing of dividend payments can all change the result. Dividends are not guaranteed forever.
Still, I liked the calculation.
Instead of only trying to reduce an expense, I could try to build assets whose cash flow covered it. After the phone bill, perhaps internet charges, subscriptions, or another fixed household cost.
Seeing my assets gradually pay for pieces of everyday life felt more tangible than simply watching a portfolio balance rise.
Dividend growth and inflation
Learning about dividend aristocrats and kings led me to think more about inflation.
A KRW 50,000 phone bill today might not stay at that level indefinitely. If a company's dividends grew alongside living costs, the increase could offset part of the burden.
Of course, neither future dividend increases nor an inflation-beating rate of dividend growth is guaranteed.
That question also changed how I thought about cash savings.
Money in a bank account can increase in nominal terms while losing purchasing power. If my after-tax deposit return is 2% but prices rise by 3%, my balance grows even as its purchasing power falls.
Preserving the amount of money and preserving its value are not the same thing.
That is one reason I came to see long-term investing as important. But cash still matters: emergency funds and near-term living costs need liquidity, and there are periods when deposit returns exceed inflation.
Would borrowing to invest ever make sense?
I also began considering investments financed by loans.
Imagine borrowing at 4% and receiving an after-tax dividend yield of 5%. The simplified cash-flow spread would be one percentage point per year.
My first reaction was: 'If dividends exceed the interest cost, why not invest?'
The trouble is that the calculation leaves out repayment of principal, dividend cuts, changes in interest rates, falling stock prices, currency movements, and additional taxes. Loan interest is a payment obligation; a dividend is not a contractual interest payment.
If the stock price falls sharply, the loan balance does not disappear. A demand for additional collateral or a forced sale at the wrong time could wipe out the apparent advantage.
I do not consider all manageable borrowing inherently wrong. But 'manageable' should mean more than being comfortable while dividends are plentiful. It means being able to cover expenses and repayment even when dividends fall, rates rise, and the portfolio declines.
Inflation can reduce the real burden of fixed nominal debt, yet rising rates or falling income may make a borrower's position worse. Debt is not the only way to address inflation, nor is it guaranteed to beat it.
For me, the issue is whether I can manage the risk all the way through.
A tool to test these questions
My interests have moved from officetels and storefronts to REITs, Realty Income, dividend kings, and PepsiCo.
At each step I considered more than yield: taxes, vacancies, legal rights, liquidity, dividend sustainability, interest rates, and inflation.
Now I want to examine those questions with data.
How much dividend income do my holdings generate? What percentage of recurring bills could that income cover? What changes if dividends are cut or borrowing costs increase?
I would also like to compare a dividend stock's current price and yield with its own history.
This is why I want to build ONSEMO INVEST, which remains a project in the planning stage. Rather than claiming to predict the best trades or guarantee high returns, I want a tool that helps me record, examine, and revisit my investment decisions.
I do not assume every judgment in this series will remain correct. My views may change, and I want to record those changes too.
The question that began with my search for rental property remains:
How much can the assets I own reduce the financial burden of everyday life?
And now there is a second question:
How long can that cash flow endure, and can it grow?