The mathematics of early retirement can be too daunting for beginners, so one way to get yourself started on your journey is to find small but meaningful ways to make life improvements.
One recent development for Singaporeans is the entry of Disney+ into video streaming, but that creates a problem for Singaporeans who already have a Netflix account. If I wish to enjoy the upcoming Falcon and the Winter Soldier series, would I want to cancel my Netflix account and then miss out on the Black Clover anime that my kids love so much? To many Singaporeans, having both subscription plans can seem a tad decadent.
A beginner can quickly get started in dividends investing by thinking about ways to solve this problem.
Of course, in fact, with some careful planning having both subscriptions can be free.
At the moment, a Netflix premium subscription is $16.98. A Disney+ subscription is $11.98. The cost per year to subscribe for both channels is ($16.98 + $11.98) x 12 or $347.52.
We know that both Netflix and Disney+ channels would need to stream through fibre-optic channels to reach your computer or Smart TV at home.
Local investors have access to Netlink NBN Trust (SGX:CJLU) that profits from installing and maintaining fibres across the whole country. Coincidentally, Netlink Trust also generates dividends for its investors who love its reliable cashflow and low volatility. If you visit the SGX website, you will find that Netlink Trust generated the following dividends in 2020:
So in 2020, Netlink trust generates $0.0253 + $0.0253 or $0.0506 dividends a year for each share that you own.
We took $347.52 and divided it by $0.0506 to figure out how many Netlink Trust shares we need to own to subsidise the cost of both subscriptions. We arrive at 6,868 shares, which we can round up to 6,900 shares as we buy shares in denominations of 100.
Now we know that should we proceed to buy 6,900 Netlink trust shares, our annual subscriptions will be mostly taken care of by Netlink Trust dividends. Currently, Netlink Trust trades at $0.94 per share, so that you will need 6,900 x $0.94 or $6,486.
Converting a larger lump-sum of cash into a smaller annual cash flow is the essence of income investing. Different investment instruments convert at a different rate, and you can also participate in some capital gains over time. The choice is as follows – you can keep and spend $6,486 as a lump sum and spend it accordingly, or you can convert it to a string of annual payments of about $347.52.
The essence of retirement planning is merely finding many different stocks from different markets that generate cash flow throughout the year so that you can live on it with some leftover to buy more shares.
After you use Netlink Trust to offset your streaming expenses, you can move onto a different personal expense.
When I am hungry, I will occasionally go to Al-Ameen Restaurant at a Woodlands Industrial park for some Thai Bee Hoon Goreng and Tom Yum Soup. Coincidentally one of the landlords in the area happens to be Mapletree Industrial Trust.
At least I know how to get a free meal throughout the year when I eat my supper there.