Have you ever sat down to pay your monthly utility bills and thought, "Man, I wish somebody else was doing this?"
Well, I'm going to tell you how you can do just that.
In my particular circumstance, Duke Energy provides my electricity. Duke Energy is a publicly traded utility that pays a quarterly dividend. So the question arises: how many shares of Duke Energy would I need to own in order for it to provide me with the monthly cash flow required to pay my own Duke Energy bill?
To determine how much dividend income I may need to generate, I need to know how much energy I use each year and how much that energy costs. Duke Energy gives out consumption summary statements, and I'm guessing other utilities do as well. We may either wait for that statement to become public or go to their website and obtain the material. In this example, I did it for Duke Energy. I went to their website and exported my consumption for the year, allowing me to focus on the most recent 12 months of usage. From this, I calculated that the total kwh consumed for the year was 10,727. Using Duke's cost of $0.145 per kwh, I calculated that I pay $1,555 per year on power. Duke Energy's current dividend yield is 4.12%; using this value, we can calculate that we would require $37,753 of Duke Energy stock. To achieve the needed income, we would need to own 388 shares of the stock at the current share price of $97.36.
I now have a goal. I've set a goal for myself. This isn't something I need to do now or tomorrow. But, you know, maybe my goal is to have enough Duke Energy stock by the time I retire to pay its own bill. That might be my objective. It is critical to establish a reasonable (achievable) time period and realistic goals. This provides us more manageable goals. You can see how you could accomplish this for your energy utility if it is publicly traded and pays dividends.
This reasoning also applies to your cell phone. Every month, you sit down and pay your bill to AT&T, T-Mobile, or whatever your cell service provider is. Every month, you send them money from your own pocket. What a treat it would be to send them their own money back. Hopefully, I've given you a new perspective on things.
Now that I've determined how many shares of Duke Energy stock I'll need to purchase, what do I know about Duke?
Duke Energy, on the other hand, is a big electric utility corporation based in the southeastern United States. It has been in operation for almost a century and has a lengthy history of delivering dividends to its stockholders. The best part about Duke Energy is that you can buy shares using an online brokerage account such as Robinhood, E-Trade, or TD Ameritrade. Of course, as with any investment, there are risks. Duke Energy stock prices can vary, and the business might cut or cease dividend payments at any time. Before investing, it is critical to conduct due diligence and research on the firm. Keep an eye out for news stories and earnings releases. Ascertain that Duke Energy's financials are in excellent order.
Part of my due diligence research, especially when investing in dividend stocks, is to determine whether the company is a dividend king. A dividend king is a stock that has increased its dividend for more than 50 years in a row. If we look into Duke Energy, we can see that their dividends have been increasing over the past 18 years. While that is an impressive record, it is not enough to elevate them to the throne. Perhaps a prince, but most definitely a Duke (ha-ha).
The other question is how it compares in terms of yield to other utilities, and we can see from the dividend king website that utilities pay an average yearly yield of 3.75 percent. Duke has a yield of 4.12 percent. In terms of dividend yield, Duke outperforms its competitors.
I'd want to point out that we've made a few assumptions here. One is that our energy usage would remain consistent over time depending on the various appliances we own; however, this could alter as they are swapped in and out over time. Second, we assume that the cost per kilowatt hour remains constant. That could change depending on how Duke Energy obtains its energy. One thing that will almost certainly work in our favor is that our goal is to have it pay for itself by the time we retire. So, until we reach that point, we'll keep reinvesting dividends to keep that dividend snowball growing in size. This will allow us to reach our target share amount sooner.