In my last post I talked about a potential rental property and the pros and cons of being a landlord. Even though our condo would make an excellent rental property, we chose to list it and forgo the headaches that renting to tenants would bring. Finding the perfect tenant is like finding a needle in a haystack. Someone who would pay the rent on time, take care of the place like they owned it, would rent from you for the long term and would increase the rent on their own merit according to inflation. If only such a tenant would exist….oh wait, they do!
Dividends as tenants you say? Why not! There is no human being on earth that can compare to a dividend payment when it comes to renting.
They pay the rent on time
Dividends are either paid quarterly or monthly depending on the stock. I see dividends deposited into my trading account like clockwork with no NSF showing up, no excuses and no leg work on my part. My dividends are so efficient at paying “rent” that I don’t even have to keep track of them.
Absolutely no upkeep
For some reason, human beings like to make holes in walls. Dividends don’t. Dividends are well mannered and they don’t feel the need to cause leaks, scratch walls, start fires, dent ceilings, wear out appliances, wear out flooring, smoke, have pets with weak bladders, leave the lights on because utilities are included, or feel the need to have parties. Actually, dividends can have as many parties as they want. There is nothing better than more dividends.
Long Term Income
Dividends don’t need to move, or choose to one day own a home. They are quite content to live in my trading accounts and to grow more dividends over time. You may have to look for more companies to invest in that have a proven dividend growth history, but they are a lot easier to find than good tenants.
Keep up with inflation
Inflation increases the cost of goods and services, and dividends don’t mind increases in “rent” to offset the costs. As dividends are increased over time, it allows your retirement dollar to keep its buying power for the long term. No renter ever likes rent increases, but when the landlords property taxes and utilities go up, the rent is sure to follow.
Although dividends are not 100% guaranteed to be paid, there is nothing, and I mean NOTHING more guaranteed in life then dividends. If a company were to up and cut their dividend completely, you could evict your shares from your trading account for not paying the rent and sell them. Trying to evict tenants for not paying the rent on the other hand is a long and frustrating battle.
Some might argue that a rental property’s value increases over the years more predictably then an investment would. The only problem with houses getting older is that the materials they are built from do not last forever. New windows or a new fence might not seem like much trouble, but when houses get to 40 or 50 years and the roof and foundation starts to go, then things start to add up. And while your fixing all these problems, where do your tenants live? No tenants means no income.
Personally I’d rather stick with dividends paying me rent then a tenant any day. No crappy renters, no phone calls to fix the furnace, and no time spent in small claims court to recoup unpaid rent. I’ll let the power of compounding increase my investments over time more effectively than any appreciating piece of property. I can just imagine the money I will save on Tylenol alone!