Brian Bollinger: Generating Passive Income

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Welcome to the new retirement podcast. Today we're going to be talking with Brian Bollinger, an entrepreneur and founder of SimpliSafe Dividends, about dividend investing and generating passive income. Brian is a former equity research analyst and registered CPA who quit his investment job to start his own company at 26. We got connected to Brian when one of our users mentioned his service and we got to talking. Since we share a similar audience. I am particularly interested in this podcast since the idea of generating less risky, reliable income from more of my portfolio is appealing. So with that, Brian, welcome to our show. It's great to have you join us.

Thanks, Steve. It's great to be here.

So, Brian, I just wanted to kind of jump in and, you know, just learn a little bit more about what first got you interested in dividend investing.

Well, growing up, baseball was always my passion. I collected a lot of baseball cards. I loved reading through stats in the newspaper on games, and I spent countless hours throwing a ball against our brick wall and fielding it myself. It was everything I loved to do. But my baseball game kind of peaked out in the fifth grade. That was my last good season. So I kind of redirected that passion and shifted my attention towards wanting to become a general manager of the Major League Baseball team one day, which I thought was the next best thing. And so I was pursuing this avenue. I read up on what the current GMs of the day where they had started off and a lot of them had either played professionally in the past or they sort of got started working in an athletic department when they were younger. So I decided, all right, let's give this a shot. And I grew up in the Illinois suburbs. I reached out to Northern Illinois University in DeKalb and was able to connect with someone there and work the summer unpaid in their athletic department. And I was doing stuff like helping with marketing, some data work, kind of back office tasks. But it was the beginning of learning how the sausage was made. And I continued doing that work in college at Indiana University, and I guess it advanced a little bit. I was then overseeing where the women's volleyball team would eat meals when they traveled on the road. But it was, it was kind of grueling work. And the more I kind of learned about the sports management side, the less interested I was becoming in that path. It seemed pretty daunting for a number of reasons. So about that time I began to discover investing and it really clicked. I think in hindsight, there's a lot of similarities, actually between studying the game of baseball and investing instead of players. It's companies though, right? So you're, you're trying to decide how much is this business worth? Is this a good business? Are people valuing it too highly? Or maybe it's cheap? And there are so many different companies to learn about. So it really set me down that track. And I was fortunate enough after college to begin as an actual investment analyst at an investment fund. Getting to study companies all day. It was awesome. So how does this all tie into dividend investing? Well, the philosophy I developed through these experiences, I like companies that are pretty boring, stable businesses that generate a lot of cash flow, they have predictable operations. And it just so happens that a lot of companies that pay reliable dividends have those traits. So there is kind of a natural fit with my own investment philosophy that I had developed through my experience. And then as an investor, I like knowing how long it will take me to get my money back. I like being paid in cash. And the appeal of passive income is obviously really big too. This concept of building a safe, growing stream of income that can one day meet my retirement needs is a really appealing message. So dividend investing has kind of fit the way I'm wired. It fits my philosophy, and it has a lot of appealing elements that I really believe in too.

That's awesome. It's great to hear how you kind of got here. I take it you've read Moneyball?

Read it, seen the movie. My brother in law quotes it incessantly.

And do you play fantasy football or fantasy baseball as well?

Yeah, I think I'm last place in my league right now. So yeah, I try, but there's a lot of randomness involved. That's what I say.

Yeah, actually I think fantasy football I played for a few seasons and definitely I saw that it was. It's all about being emotionally unattached to your players and not being a hardcore fan. It's just about finding the guys that produce the best and like putting them together. You know, the poor man's version of Moneyball. Okay, that's pretty cool. So, I mean, do you feel personally like you've been successful building your portfolio and pursuing this dividend investing strategy?

Yeah. So success is one of those interesting things to define. Right. Everyone can kind of come up with their own benchmark to look successful. What kind of troubled me when I was working in the investment management field was that I kind of describe it as, in many cases, wealth seemed to flow in one direction and it often wasn't towards the client. Whether it's poor performance or high Fees. Just look at the numbers. We've seen this big wave of money moving out of actively managed funds into low cost ETFs and index funds. Standard importers comes out with a study every year and they showed that over the last 15 years, I think over 90% of all US large, mid, small and all cap active funds have been outperformed by their benchmarks after fees. So it's incredibly hard to beat the market. And that's not what I'm setting out to do. I think what attracts me to dividend paying stocks is when they're used with retirement in mind. I think there can actually be legitimate, sustained skill with avoiding dividend cuts, generating safe income and seeking to keep up with the broader market over time while having a more defensive portfolio. And with those benchmarks, yes, it's been very successful. The company was only started in 2015 about four years ago. So we've not had a full economic cycle or a downturn to live through. But to date, our dividend safety score system, which we can talk more about later, has avoided 98% of dividend cuts in advance. And the three portfolios that we have that I actively manage in our newsletter and I personally invest in myself, those have all generated annualized total returns between 12 and 14%, while the S&P 500 has been up about 11%. I don't expect that to continue. I think mean reversion is a powerful force. But from a question of how has the strategy been doing, can this work using this admittedly narrow time period? Sure, it's working well and I expect it to. With the focus again on safe dividends, I think there's skill behind that and I don't really believe anyone can consistently outperform the market by a meaningful amount over time. So that's where I'm coming at.

Cool. No, it's great to get your perspective and we'll dive more into that because there's, you know, we're definitely kind of on the passive side of the, you know, opinion spectrum, I guess. But I get what you're doing and I want to dive into it. But, you know, so before we get into that, I'd love to just kind of have you give us a quick overview kind of on the history of dividend investing. I was, you know, in preparation for this, I was reading up on, you know, kind of how this got started. And you know, the first publicly traded company was the Dutch East India Company, which was created in 1602 and paid dividends for 180 years, which was pretty Surprising for me to read. And I guess they, it looks like they paid roughly 18% annually. So that, you know, I mean originally, you know, most people invested in the market for income, right, to get dividends. And then in the past several decades it's shifted more towards kind of capital appreciation. And many companies, especially tech companies, don't pay dividends, they just keep the cash, reinvest it or you know, in the case of Apple, they hoard huge amounts of cash. But we'd love to kind of get your perspective on kind of how dividend investing and just stock investing has evolved.

Yeah, it was interesting you brought up the Dutch East India company. There was some book I was skimming through, covered part of it. It's a huge book, I forget what it was called. And back then, I mean it's so hard for us to fathom I think because the flow of information was just almost non existent. You know, buying shares in a company like that was kind of almost like buying a house where there's very little information. There's no really active secondary market at all if you wanted to unload your shares. And I think it was just a much simpler equation. I buy shares, I give the company money, it goes out, earns a higher return than I could earn with that cash. And as it generates cash flow, I get my investment paid back over time. And what's cool about this company, Dutch East India is there's a trading company so you know, they're sending ships all over throughout Asia, buying and selling. And so like when you would receive your dividends, my understanding is they were literally brought back via boat. So you can imagine, you know, lining up at the dock waiting to be showered with these cash payments from the success of their operations. And it's not as exciting today getting paid electronically, but this, the, the idea of passive income is the same. And when you think about where dividends come from, it's also the same today. They're, they're an output. And I think many times sometimes investors will get hung up on the differentiation between a value stock and a growth stock. And I think it's sometimes similar with a dividend paying stock versus a non dividend paying stock. These are all companies trying to do the same thing, maximize shareholder value. There's different ways to skin a cat. And today I think in the US alone I read there's over 3,000 companies that pay dividends. So a lot of companies pay dividends. It's just to different degrees when you're thinking about how do you earn a return on your investments you make, whether it's in your 401k, dumped in an ETF or what have you, it's either through receiving dividends back or seeing price appreciation once you buy. So to me, total return is kind of an agnostic thing. I don't really care a whole lot if it comes more from dividends versus earnings growth. I just like that a dividend return is kind of cold hard cash. It's money in the bank. It's a tangible thing. And the companies that pay a dividend, there's some appeal there too because it limits the amount of retained cash flow a management team has. So ideally they are more disciplined. If the company makes a dollar in earnings, for example, and pays out 50 cents, well, they only have 50 cents left now with which to invest in projects. Hopefully that causes them to focus more on their highest returning projects. And if they were to go out and issue a bunch of shares, well, there's a cost associated with that because those shares have dividends that must be paid too. So I like it from a corporate discipline standpoint as well.

Yeah, it's a great perspective. So you said there's 3,000 companies that pay dividends. I was just looking online. It looks like the number of public companies currently listed is only 3,700 these days. And that's by the way, down from 7,300 in the 1990s. That seems really high, a high percentage just in terms of the number of companies issuing dividends. 3,000 out of 3,700.

Yeah. I think it may come from the number of exchanges. Like if you look at the over the counter market, there's thousands of companies there. But yeah, I think in the S&P 500 alone, the majority of those companies pay a dividend. And it may not be a big dividend. The market's yield is less than 2%. So many companies do have a dividend policy, but it's a small portion of the money they make. It might only be 10 to maybe 20% of the earnings they make, they distribute and the rest goes towards buybacks or just reinvesting in the business, acquisitions, etc. But there aren't that many companies that have paid dividends a really long time. To your point, there are some. Like ExxonMobil has paid a dividend since 1882. Colgate, the toothpaste company, 1895. But it's a pretty small list when you're going back 50 or certainly 100 years. The world of companies keeps shrinking and consolidating, at least in the public Markets.

Right. How many companies do you track in your business?

So I really like Warren Buffett's concept of circle of competence. And over the years I realized mine is quite small in many ways in life. But in investing in particular, I really emphasize focusing on businesses that are simple, that you can understand how they make money. If you can do that, you're much more likely to hold an investment for the long term and let it compound for you. So in terms of our company's coverage universe, I published research on about 150 to 200 dividend stocks. And these are kind of the biggest companies that are most popular with investors. Most of them tend to fit that profile of kind of these safe, mature, large businesses that, generally speaking, pay stable and growing dividends. So it's not a huge universe. And you know, I like to say there's really no more than a couple of hundred businesses I would ever feel comfortable owning just because most places are just too hard to understand. A lot of management teams get blindsided by changes and they're in the weeds managing the company every day, looking at all the internal data we don't have. So being, being an outsider, it's that much more difficult. So I like really focusing on businesses that are stable, mature, and industries that have a slower pace of change, which is getting harder and harder to find.

Right. Yeah. I want to circle back to that idea of in the risk side, the potential disruption that you might see. Let's move on. Obviously you're a fan of dividend investing. Why should people consider this?

Well, I think it depends again on where a person is in their curve, I guess is as an investor and what their goals are as they change. So someone that might have 20, 30, 40 years till retirement and it's gotten wind of this whole saving investing compounding thing. In my view, their goal is really to maximize long term total return because the bigger your portfolio is, once you hit retirement age, it gets a heck of a lot easier to make the numbers work out without taking on risk beyond what you're comfortable with. So for those investors, dividend growth investing is one avenue that I think makes a lot of sense to generate a healthy long term total return. Do I think it's going to be better than the market or worse than the market? No, I think it's a strategy that can encourage people to stay the course because you can kind of focus on that rising buoy of passive income growing each year if you're doing it right and saving more. But otherwise, like I said at the beginning, I think dividend Growth investing is a good strategy to stay the course and kind of track the broader market over time. An ETF could be just fine doing that. A low cost fund can be just fine doing that. I think it's different once you get to be thinking more about retirement. Maybe it's 10 years away, five years away, maybe you retired five years ago. And the question now becomes not so much about wealth accumulation, but wealth preservation and how can I keep this nest egg intact as best I can make it generate enough income for me in a manner that as we not worrying about what if I live to be 100, am I going to run out of money? And the appeal of dividends in this investor's case is really interesting because instead of having to focus on just selling off principal, selling off assets you own to raise cash each year, you can kind of change your mentality a little bit to a degree and think, okay, well, what if I could invest in a portfolio that threw off a 4% yield of dividend income that actually grew 4 or 5% per year and use that to live on and supplement it with either smaller shares of principal, smaller sales of principal, or other income sources you might have. And that kind of flip of the switch is interesting because it can allow you to preserve principal and not worry so much about what do I sell now, or what if the market drops 50%? In any email I got, I'll read you it really quick. Let me find it here. From one of our customers, Jeff wrote, you know, thanks to your service, I'm funding our retirement without having to touch any principal at a rate that is still allowing me to add to my savings. I used to live and die daily on the ups and downs of the market, but now I just smile knowing that my dividends keep pouring in no matter what the market does. And that's really, I think the appeal of dividend investing for that demographic.

Right, yeah. Makes sense. I guess the question is will if the market takes a big correction, as long as the company's core business is strong and they can continue to pay dividends at the same rate or the same absolute amount of cash, so it'll be a higher percentage yield, they're good. If they start cutting dividends, then it starts to not work as well. But, you know, I guess the idea is hopefully you can, you can be prepared for that and have a plan to adjust your expenses or maybe draw other savings to bridge that gap if that happened.

And I think that's the key, both planning and expectations. This kind of reminds me of Mike Tyson Right. Everyone has a plan until they get punched in the mouth. And I think with, with the dividend investing, it's honestly the same way because if you look throughout history, dividend cuts have kind of come in waves typically tied to recession events. So 2008 is a pretty extreme example. But if you were to look at just The S&P 500 of those companies that paid a dividend, I believe about a third of them reduced their payout and The S&P's dividends dropped about 25% from peak to trough. And that's, that's pretty similar if you look at like, if you want ETF people invest in or like to invest in that pays dividends is Vanguard's High Yield Fund, the ticker symbols VYM. And there was a similar story there. They, that ETF, I believe it owns over 400 companies. Oh, it's only focusing on high yield, not safety. So if you look at the income paid by that ETF from 2008 to its trough in 2010, its dividends fell. It was about 24, 25% and they didn't recover to their prior peak until 2012. So to your point, like there's, if you're not prepared for that and you're just thinking like, oh, this is awesome, you know, I found this company that's paying 8% and it's paid me that for the last year and a half, like it's, it's reliable. Well, it is until it isn't. Right. You have to be focused on companies that are financially healthy enough to weather a downturn without having to cut their dividend or ideally somewhat recession resilient businesses, while also maintaining a diversified portfolio that can deal with an unexpected hit or two. Because that will happen too. Like in 2008, no one expected General Electric and Bank of America, these kind of darlings of Wall street, to experience what they experience, not to mention the dividend reduction. So there's only so much you can do. But we try and help people stay between the guardrails, focus on the financially healthiest companies that have the best chance of making it through an economic downturn. And also helping people design a stock portfolio that is keeping them between the guardrails, being overexposed to any company or sector.

Have you back tested your strategy against kind of the 2008, 2010 timeframe? Like, I know you identify specific, you know, you're out there saying, hey, here's this portfolio of companies that I think could be good and you rate their kind of safety levels for their dividends. And provide alerts if you think it's going to fall and not be able to pay the dividend. If you went back, would you have identified these companies that tanked, do you think?

We get asked that question somewhat often. The short answer is we haven't gone back and back tested. And that's largely because many of the lessons learned that have gone into the creation of our dividend safety score system were rooted in the 2008 financial crisis. So it kind of feels a little cheap to go back and say, oh, you know, knowing what we know now, if we had known that in 2007, we would have said avoid all these banks, don't invest in ge. So what we do is we made a real time track record. So anytime there's a dividend cut, we record it on our website and we show what the company's dividend safety score was before the cut was announced. And so far we've over 98% of the 270/ companies that have cut their dividends since we've been in business in 2015 have scored below our safe rating with most of them falling in the very unsafe bucket we have. So we'll keep doing that. We're a big time believer in real time transparency. So, you know, I'm just as eager as everyone else is. But isn't for the next downturn to kind of show the value and help people to, you know, understand how our system works? And it's, it's something I'm monitoring daily as well. It's not just kind of a static marketing thing. It's something that I really care about since it's so important to our members.

So if it really works, then I should be watching your dividend safety score. If I start seeing a bunch of like red alerts go off then across the bank sector of your, of your portfolio?

Yes and no. Our safety score system is designed as best I could do it, to have a long term outlook. So we're trying to look at a company's dividend safety not next quarter, but over a full economic cycle. So it's taking into consideration things like, well, how'd the company do during the last downturn? Is the balance sheet in good enough shape? Because the company can maintain a lot of debt now while credit markets are friendly and times are good, but that could become a big weight if borrowing conditions worsen in a downturn. We've got dozens of different industry templates trying to slice apart dividend safety risk. So it's comprehensive and it's something that keeps getting Better and better too. We put a lot of thought and time into it.

Okay, awesome. All right, well, I want to move on to some of the downside risks. And, and, but before that, I'm just going to kind of recap when I was doing research for this. You know, it seems like the reasons to consider dividend investing are it looks right now, you know, it looks like higher returns. Right. It encourages disciplined investing. And you know, I saw that also on your site. That, and I've seen this in other places that kind of the average retail investor actually captures like a 2% return because they're actively basically making mistakes versus staying in the market versus the markets about 8%. It generates income for you, which without drawing down your principal, so it hedges your longevity and also hedges inflation because you're capturing the companies are factoring in inflation to their own pricing and that's being passed through in the dividend as well. So those seem kind of like the main benefits of this, which are significant from the downside perspective. I think when I was looking at what you're doing, you are buying a basket of companies. And I think in your site you recommend 20 to 60 companies. So it feels active versus the, if you talk to a passive person, they're like, hey, buy the whole market. Buy vtsax and just own the whole thing. So anyway, from one of our users, he said, I'm interested in why dividend investing is viewed as so special when realizing capital gains is another option. The tax rate on qualified dividends is the same as on long term cap gains. So since dividends are a return of capital, what makes dividend stocks so special?

I think it goes back to again, what the investor is trying to accomplish. To me, I'm total return agnostic for someone who's in the wealth accumulation and growth phase of their investing life. But again, once you're in the stage of harvesting income, I think it just, it's a lot easier to stomach the idea of, all right, let me find a company like Coca Cola that's raised its dividend 56 straight years. Let me see if I can build a portfolio of businesses that I think will keep doing that and not have to worry about the market being down 30% in 2020 and what do I sell? How do I withdraw from my account? So I think the issue there is really just where's the income? How's it being generated in retirement? And separately, I think there are some, some other benefits, which I've kind of talked about at the beginning. A stock that pays a meaningful dividend they're kind of showing a commitment to rewarding shareholders. They have fewer, they have less capital available with which to invest. So they are hopefully focused on higher returning projects. And it's just a corporate culture that I'm more comfortable aligning myself with. So I think when you're trying to generate safe income, I'd feel better hand selecting at least most or some of the what I'm in instead of owning a fund which pays a variable dividend and I don't know if it's going to be up or down 30% next year potentially.

Got it. Because the kinds of companies that they own. Okay, so I have another question. It's along the same lines from one of our users and he's saying, you know, I'd be interested in the behavioral reasons that result in many investors ignoring the evidence that a globally diversified portfolio of index funds gives them the best shot at the optimal outcome in favor of a dividend growth strategy that targets the value in what he calls a naive manner. Some dividend payers are not value stocks and some non dividend players are value stocks, resulting in an overall less efficient and much less diversified portfolio, which therefore will have a wider dispersion of returns which on average will be less than a more diversified portfolio. So it's essentially the same question like, hey, you're concentrating risk, you're being more active.

Well, yeah, I think people do it. Just turn on the TV or go over to Seeking Alpha and you'll see why people engage in irrational strategies. We kind of talk about the online financial world as just being a wild west. You just need a computer and two arms, right? To sell a service or make a sensational claim, you can remain anonymous. There's so many misleading messages and unfortunately a lot of people are apt to follow them. If I see a headline saying, oh, Scoop up this 16% dividend yield. The stock has potential to generate 22% annualized returns. If I don't know much about investing or what's really reasonable, yeah, sure, I'll go all in with my portfolio until I get burned and have to learn the hard way. I think that's part of the equation. And then I would just reinforce what I said earlier, which is from a long term perspective. I agree. Just buy an index fund, keep your costs low. That tends to be the biggest determinant of your long term returns besides the asset allocation plan you've formulated. And I think dividend paying stocks can certainly play a good role in that. They have qualities that I think help them to be stocks that are less volatile overall and have a healthy long term total return potential. So there's different ways to skin the total return cat, especially over 30 year time period.

Okay.

And when you're not focused on income too.

Yeah. Interesting. So back to kind of the, the, you know, your need to kind of actively watch these companies. Do you feel like companies are getting disrupted more quickly these days? I mean, I, we definitely see that here and in the technology side of the world. Right. It's so, you know, where technology goes, companies get blown up. I mean, Amazon's going out and blowing up retailers like J.C. penney all over the place. And it feels like almost every business is subject to this. Now, I grant you, things like Coca Cola or Clorox that sell things that you use in your house. Yeah. Maybe that's not going to get disrupted as much. Although from a distribution perspective, maybe would love your take on, you know, on. Do you feel like you have to be quicker and more cognizant of these significant potential existential risks to these companies?

It's all the companies that aren't new retirement or simply safe dividends.

Right.

They're the ones that are in the crosshairs now. Even our worlds. I'm sure it's the same thing. I was actually reading through Kroger's annual report and you think supermarkets, it's been around forever and sells groceries. You know, people keep eating, the population is slowly growing. But they were talking about, you know, their own space is changing rapidly too. With just with my family, for example, you know, we, we order food, groceries from probably three different chains around here. Meijer, Kroger, a place called Market District. And all of them, we just even Amazon pantry reviews because, well, I like the delivery service here. We pick up at Kroger here. It's just kind of splintering things off. And they've realized this and they're now having to pour a ton of money into making their stores a convenient place to either shop in person, have groceries picked up or offer that delivery service. They're going to lose share in a market that's not growing. And that's. That can spell the end of a grocer with, you know, razor thin operating margin of 2%. Anyway, my point is like, yeah, they're changing. And in the annual report they mentioned that if you look at the Fortune 500 list, fewer than a quarter of the companies that were on the list 30 years ago are still here today. And these are absolute giants. So the pace of change is certainly accelerating across a lot of different industries. And companies that pay a really big dividend that we're not ready for change, those can be really dangerous investments because they're trying to balance on one hand keeping their shareholder base happy. Right. By offering this big dividend payment. That's a big part of why someone owns the stock, but then it's also kind of hamstringing them because that's capital they can't use to make the right acquisition, to make the right big investment to evolve their businesses. So you do have to be very careful to again focus on companies that have the financial health to not only keep shareholders happy and keep the income stream safe and growing, but they also have a good balance sheet. They also have enough retained cash flow. And they're also in an industry that's not shifting around a whole lot where they can not risk falling behind. So when you look at companies that have paid steady dividends a long time, it rules out a lot of these industries that are just not good places for capital, like steel, places where there's a lot outside of a company's control. And even the technology sector, there's very few, at least non large cap tech companies that are reliable dividend payers that even choose to pay dividend at all. So it's kind of a bit self selecting in that nature. But you do have to be careful too with again, focusing on simple businesses and simple industries is a core tenet of what I try to follow.

Right, okay, that's great. So I have a. I also wanted to ask you about a couple other types of income producing investments that, that you covered on your site. MLPs master limited partnerships and REITs. So MLP is, I mean, I know at a high level they're essentially typically you're buying like a share of like a pipeline, some energy, some in the energy space, transporting oil and you know, any color commentary on those kinds of vehicles as opposed to dividend investing.

Yeah. So a lot of dividend investors will own MLPs. We have not. We've actually never owned an MLP. There's actually very few that I've ever felt comfortable with. And then that space is evolving pretty rapidly too, and for different reasons. Not so much technology, but regulatory and tax changes I can briefly touch on. But.

Right.

MLPs were created, I believe in the 1980s by Congress to encourage investment in basically energy infrastructure. So. Right. Companies that have pipelines, they might have storage, they might process oil and gas to help get it from where it's produced to where it needs to go to the end User and in theory, these are supposed to be really reliable, solid businesses, right? Like their customers oftentimes have volume committed contracts. So no matter how much oil or gas they send through the pipeline, they're still paying the same fixed fee, they're under long term deals, et cetera, et cetera. So MLPs in theory have very stable cash flow. And that's largely held true even despite the oil crash that's happened the last five years. But what's happened in the space, in a nutshell, when the oil prices crashed, even though MLPs marketed their businesses as being insensitive to commodity prices, since they're not the ones that make a dollar more if oil is higher or lower their unit prices, their stock prices got hammered. I think the MLP index was down 60%. So this caught a lot of investors by surprise. And what happened was MLPs are required to distribute the vast majority of their cash flow, as they're called distributions, where they're the same thing as dividends. So to grow the business, an MLP has to constantly issue new units, new equity or debt. And when their stock prices tanked because investors were fearful that, well, maybe these oil companies won't be able to honor these contracts anymore, they could no longer issue equity affordably. So they had all these big growth projects in the works and they had to decide, well, do we cut the dividend or do we cut back on the do we stop these growth projects? And a lot of them decided, well, we're cutting the dividend. And that really stunned a lot of retail investors who had been spoon fed this message of it's a toll booth business model, what can go wrong? And it's an 8% yield because they pay out all the cash flow. So a lot of MLPs are actually going away now. They're either rolling up or converting to corporations. So the industry is changing quite a bit. And tax reform brought in lower corporate rates. And MLPs don't pay taxes, they're passed through entities. So it made that structure a little less attractive too, since the tax savings weren't as great. So it's a space that has evolved significantly and I always urge investors to be cautious. There is only a few MLPs that I feel like are really well run companies and will probably stay MLPs and not be affected. The rest, you really have to be careful with what you're buying.

Yeah, that's great to get that commentary. It does definitely seem like a pretty niche investment. How about REITs? Do you look at those?

I do. REITs I'm much more comfortable with. Again, all things in moderation. Because like MLPs, REITs or real estate investment trusts, they've been around a lot longer. I believe they were created in 1960 and it was for a similar reason. The government wanted to encourage investment in real estate. So real estate investment trusts, they own, gosh, they can own just about anything real estate related. So public storage is one. Consumers are probably pretty familiar with self storage. They might own malls, they could own industrial warehouses, they could own hotel chains, they could own healthcare facilities, gas stations. There's a ton of different types of REITs. It's really a big box of chocolates. And it's also niche too, in that right now at least the real estate sector, I believe it's less than 5% of the overall S&P 500. But it's a big appeal to income investors. Again, because they're required by law to pay out at least 90% of their taxable income as dividends. So they have a high, as it's known, a payout ratio. If they earn a dollar of taxable income, they have to send at least 90 cents of it back to their investor base, so their yields are higher. Which again raises the appeal of these as retirement holdings. We own some REITs in our dividend portfolios. And you have to be careful too, because like MLPs, if they're growing REITs, they do have to issue capital to keep growing because the dividend doesn't leave much left. So they got hit pretty hard during the financial crisis too. Over 30% of REITs either cut their dividends, suspended it, or paid it out in shares instead of cash. So again, you got to focus on what industry it's in, how cyclical is that and how healthy is this company? Is the balance sheet good, Is the payout ratio reasonable? And that's again, what we try to do with our dividend safety score is to help investors size up. Okay, what REITs seem like a good fit for my risk tolerance.

Great. It's awesome to get that color and anything else that your users are kind of actively looking at besides kind of dividend stocks, REITs.

I would say most of our, the people that are drawn to our website, they have of course, a portfolio of individual dividend stocks that probably includes REITs and MLPs. A lot of them also will own some ETFs or mutual funds. And that could be for a few reasons. One, some people just get, I think feel more Comfortable, the more diversified they seem to be. And two, they might only have options like that if they have a company sponsored 401k, whatever the restrictions might be. But outside of those securities, less common ones are preferred stocks. And you can think of a preferred stock as like kind of a hybrid between, you know, Coca Cola stock you might buy and bonds that Coca Cola sells. They tend to pay a fixed dividend, and it's usually a higher yield because of that. Typically, you can find a Preferred that might yield 4, 5, 6%. But not a whole lot of companies issue preferred stocks. But their higher yields make them attractive. And they're more stable too, since they're that hybrid right between a safe bond and a riskier share of common stock. The other type of investment some people will look at are closed end funds. And if a preferred stock is a hybrid between a common stock and a bond, a closed end fund is somewhat of a hybrid between an actively managed mutual Fund and an ETF. So they trade like ETFs, but they're actively managed, like an active mutual fund. So their fees tend to be higher. But they also engage in strategies that boost their income appeal. So it's not uncommon to see closed end funds that might offer a yield of 6, 8, 10%, usually because they employ leverage. So these can be riskier investments. Again, you have to be really careful to understand, like, well, what, what is this fund doing? Just because it says it's a fund doesn't mean it's a safe, diversified little angel that'll float through the next downturn or whatever their, whatever their strategy is, it can vary wildly with how they invest. So it's an area that I'm not totally opposed to, but you have to really do your homework if you're going to own some of these vehicles, because since they do trade like an etf, their valuation can drift significantly from the value of their underlying assets. They can trade at huge premiums when times are good. And during a downturn like the financial crisis, even if their Investments are worth 100 bucks, investors freak out and they can trade at 70 cents on the dollar. So you have to be aware of those risks to go into that space.

Yeah, I think for a lot of folks, they really have to be thoughtful about what kind of risk they can handle emotionally and also financially, and really understand that, hey, if you're targeting a return that's well above market indexes, there's risk that comes with it. You can never get away from that. It's like everyone's always looking at, oh, can I get 12%. Yeah, sure. But just be ready for some extreme volatility in your portfolio, which many people don't understand.

I think. Wasn't Bernie Madoff targeting 15% annual returns?

People are like, oh, great, right?

If it sounds too good to be true, just come to your senses. Or be willing to take a speculative bet and understand the consequence. It's one of the two.

Right? All right, so I'd love to kind of understand from your perspective just how to get started doing this. So if somebody is interested in this and they say, okay, I want to put part of my portfolio towards, you know, a dividend strategy, you know, how, how would you, how do you suggest they get started?

Right. Like we were saying just a minute ago, I think a big part of the work happens before you get started doing anything, thinking through issues. A lot of what you guys cover. Trying to understand just what's my risk tolerance, what am I trying to do and come up with an asset allocation plan, right? How much should I invest in bonds? How much do I want to hold in cash? How much do I put into stocks? Answering that question will by far have the biggest impact on not only your income generation, but just your long term return and risk profile. And it's going to be different for everybody. With that said, once you have decided, all right, I'm going to invest 100 grand into a dividend stock portfolio for whatever reason, the question is, well, how, how do I do that? Well, you could buy a dividend etf and that can work well, depending on what you're going for. The downsides to an ETF in my view are you lose a little bit of control. Right. Well, Vanguard's High Yield ETF yields 3% VYM. A lot of people like, that's, that's not gonna cut it. I, I think you could have a conservative strategy that puts you between a 3.5 and a 4.5% yield in today's market. So if you're just buying the etf, you're kind of maybe leaving some income on the table, depending on what you're looking at. That's one of the downsides and you don't necessarily understand the risk profile of it because it could be spread across 50 companies or 500 and it's not focused on safe income.

And why do you think that Vym only pays 3? I mean, I'm assuming VYM has a really low load. Why do you think they're only achieving 3% when you think you can achieve 3% and a half to 4.5%.

So they're spread out across over 400 companies. And when you think about the s and P500 has a yield of 2%. There's just not that many companies that yield more than 4%. You're probably looking at a few hundred. And a lot of those are going to be junk companies that you don't want to own. So part of the blessing and curse of an ETF is like yeah, you get a lot of diversification, but that can cause trouble actually when it comes to generating a reasonably high income and a safe income too. If you look at the dividend payments from VYM for example, they're all over the map each quarter you have no idea what you're going to get paid. Coca Cola, they tell you exactly what you're going to get paid. So if you're investing in individuals paying stocks, you can customize your portfolio's yield and risk profile and you know exactly how much you're going to get every month of the year, which a lot of people appreciate. Being able to see it again helps to focus on safe dividends. But how do you do this? All right, alright, so you decided 100 grand in dividend paying stocks. Now what? Well, you know, there's articles you can read on our website or others I'm sure that talk about how to build a diversified portfolio, but there's just a few guidelines that our website and portfolio tracker adhere to that I believe remove most of the risk. So first is you don't want to just own a few stocks because your return profile is all over the place. That's why people like diversified index funds like Warren Buffett, if you look at his partnership back in the 50s and 60s, he might have a single stock that accounted for upwards of 40% of his portfolio. And it worked out great. In 1968, his portfolio was up 58%. The Dow was up 9%. You don't want that in retirement. So I've kind of settled on this range of like if you're owning really quality, basic, safe looking companies, I would not go less than 20 in a portfolio that's pretty concentrated. But I think once you get beyond 60 as well, you're kind of owning so many things, it becomes much more of a chore to manage it and the diversification benefits start to tail off. And there's academic studies that kind of support that range, which I can direct anyone who's interested to. But besides that, you're looking for companies that operate in different industries. Like if you were saying, okay, I've got four 40 bank stocks. These are great companies. They pay dividends a long time, they mint money. Warren Buffet loves them. Well, if you owned those before 2008, your dividend income would have been slammed and you probably would have lost a ton of money and panic sold. So it's important to spread your risks over different parts of the market. So I like to cap each sector's exposure at 25% of my portfolio's overall value. And again, that just is to protect me from extending too far in an area. The final part I'd say is I like to equal weight these investments too, because it's really difficult to know which stock will go on to be one of the best long term performers or run into trouble too. The world is changing as fast as we've talked about. So you're kind of following those three overarching guidelines and you're focused again on looking for companies that you understand. They seem like simple businesses as you learn about them. And their dividend appears to be, has a risk profile, I should say, that's aligned with what you're willing to, to accept.

Okay. And you've constructed, you've constructed kind of three portfolios that yourself that you invest in personally and track.

Correct.

Okay, and how do you, how have you separated those? What are the, what's the purpose of having three for each one?

So each one has a slightly different goal. Our most popular one is by far conservative retirees portfolio. And that one targets a yield between 3.5% and 4.5% with low volatility safe dividends that moderately grow over time. And we're just trying to basically track the broader market with less risk overall. So that portfolio is focused on mature companies like Johnson and Johnson that paid a dividend a long time. They remain in great financial health, they keep moderately growing, and they're defensive businesses during downturns. The other portfolios, one is called our long term dividend growth portfolio and that's focusing on companies that Yield closer to 1.5% to 2.5%. So they're retaining a lot more cash flow to grow quickly. So you're not going to buy that if you're retired and looking to generate income today. That's kind of more in the vein of people who like seeing this passive income snowball starting small and they're trying to grow their wealth a little bit more aggressively.

Okay, got it.

The third portfolio is kind of a mix between the two.

Got it. But the most popular one is conservative retirees. What does your audience look like in terms of age? And kind of wealth or savings.

Well, our service is again focused really on this concept of I think there's skill behind generating safe dividend income and reducing portfolio risk. So we're not selling the message of beating the market or buy these 10 stocks every month. We want people to learn how to do this on their own, with us by their side sending them the right tools and easy to use data and research so they can go forward with confidence to meet their goals without being stuck with high advisory fees or anything like that. So most of our audience is someone who is now thinking about retirement and hey, how am I going to make the numbers work? And can dividends play a role in that? So most people that are interested in our service are between 50 and 90 years old, if you can believe that. And they all have this shared interest of either learning more about building a dividend paying portfolio or they already have a portfolio in place and they're looking for someone who can help them understand the risk profile and monitor that going forward to keep their income stream as safe as you reasonably can.

Yep, makes sense. That's cool. So why not start your own fund?

It's a good question. We get a lot of emails from people that are asking us questions like, hey, why don't you guys launch an etf? Or can you personally review my portfolio? I'd pay you something to do that. And today at least, you know, we're not an ria. We legally can't do that and we don't, we kind of provide information. People do those things themselves and I think it's just really hard to do a lot of things well without sacrificing on quality. So for the foreseeable future at least, our plan is really to just double down on what we feel we already do. Well, now that our customers like and try and make more of them increasingly love it. And that's so far. It's been just a really, really valuable thing for us to do that we, we're kind of unique in that we don't do any active marketing. In fact, this is, I think the second podcast I've ever done. The last one was three or four years ago, but I really like Steve, so here I am instead. We're a small team and we focus everything that we do on just improving our service. So you don't see our research blasted anywhere else on the web. It's all on our own website. We're not out there tweeting about things. It's just really an internal focus. And I think our customers have really Appreciated that we're not trying to upsell them on new services we've launched or anything like that. And they've talked a lot about us and that's been how our business has primarily grown to over 2,000 customers today. It's just word of mouth keeping people happy. And so until we feel like we've tapped out on opportunities to make our service better and better, right now, I don't foresee us moving to another model. But there is a need there. There is, because at some point, you know, when you kind of age out of managing individual stocks, right, Your wife doesn't have an interest in it, your kids aren't interested, or they don't have the knowledge and you're kind of left like, well, gosh, what do I do? So in fact, some of our cancellations, most of them even are due to people aging out where they say, hey, I love the service, but like I just can't manage a portfolio of individual stocks anymore. So they seek out an advisor or some other way to do it. So that's a problem that's on our minds a lot. There's not a super easy way or thought of to solve it without going down that route of providing more individualized service. But for now at least, we're just going to stay the course. And I think that's something our customers really appreciate about us.

Yeah, it makes sense. I mean, I totally get staying focused and focusing on your differentiator, which is this dividend safety score and actively, you know, kind of actively watching these companies. I think that has value. But yeah, I mean, when I'm after being in this space for a while, it does feel like so much of this is lowering the barrier for people, whether it's for planning on our side. Like, hey, anybody can build their own financial plan and retirement plan and you can actually understand it. Get educated to investing and how to do it, you know, in a low cost way, in a way that you understand and in a way that meets your needs. If it's, you know, and like you, most of our users are over 50, they're kind of like, hey, what I really need is how do I convert this pool of assets to income in a way that I understand that lasts for as long as I will, which is unknown and adjust for inflation, which is unknown and doesn't, you know, go up and down in a huge way that keeps me up all night because I think everybody feels like, hey, the market's pretty highly valued. It's had this 10 year run. What happens if we hit 2008 again, I mean, unlikely. 2008. But if we hit, you know, if you have a 20, 25% hit, which is, I think, the standard deviation of the equity markets. And so you should expect that in any given year that could happen and you go from a million dollars to 750,000 bucks, you're like, that's painful to see psychologically. So, yeah. Anyway, my point is that I think the idea of a fund would probably be pretty scalable for you.

It's a great business model. I mean, having come from the fund world, I mean, it's unbelievable. The place I was working at.

They.

Started up in the late 90s, and by 2010 they had scaled that business from nothing to at the peak, at least over 10 billion in assets. And when you're charging 1% and you don't need to add people to grow that business, I mean, we could have kept the same team in place. And if the business quadrupled to 40 billion, your revenue just went up significantly and your headcount stayed the same. So it's a great scalable model if you can deliver results for folks.

Well, that's where Vanguard has been crushing the fun world and forcing fees to come down, which is good. And, you know, our thesis is the same. Similar things are going to happen to individual advisors. So one of the places that high fees still exist are individual financial advisors, and they do add a lot of value. The question is, it's the same model, though. Like taking 1% of someone's million dollars is $10,000 a year, and that return gets lost that year, all the future compound growth gets lost. If you look at the math, it ends up being like 33% of your lifetime returns.

It's scary how it works and it sounds so innocent. 1%.

1% sounds great. If I have an advisor and I advise $100 million and I get 1%, I'm making a million dollars a year. So great, let's keep doing more of that.

We wouldn't be doing this podcast. Right. But I mean, to be fair though, when you go back to that number we talked about earlier, that 2.1, I think it was Del Bar who conducted this 20 year study and found that it was a 2.1% average annual return the individual investor earned. I mean, gosh, an Advisor could charge 3%. If they just keep that person invested earning the market return, they'd be, you know, probably tripling their return to 6% a year after fees.

No, and I totally buy it. I mean, and that, that's where the value of the advisor is it's, it's managing people's behavior and talking them off the cliff. When they come rushing and be like, okay, it's 2008, I want to go to cash, let's go to cash. Or 2009. And that's what people did, they went to cash. And then the market snaps back and you're in cash. And then you're like, okay, let's get back in 2019, let's put it all in.

I was looking at something I'd written down. I think it was January of 2016. That's when the market dropped. Might have been 10% to start the year and everyone was freaking out. And T. Rowe Price, it might have been Fidelity or Schwab, I forget. Yeah, they said their contact with customers, whether it's phone or email, surged 60% to all time highs. Because that's when everyone pays attention, like, oh my gosh, what's happening? Give me out.

Well, the last couple times the market's corrected a lot. The robos out there have actually had some site outages or people can't get through and they're like, wait a sec, can't talk to these guys.

Yeah, it's really interesting how that whole landscape is evolving. We have some advisors who I think use our service and it's kind of the same story. They're looking for ways to differentiate themselves. Right. Because people are, you know, fees are becoming more and more transparent, performance track records more and more transparent. People are talking about information is just flowing everywhere online. So anything you can do to just show people how you're adding value and kind of justifying fee structure. I think it's just that transparency is really increasingly appreciated. And if not, you know, there's, there's alternatives that are bubbling up. So like all things in capitalism, it can, someone will benefit from the greater competition. But it's not always the incumbents.

Totally. All right, so just as we wrap up, I'd just love to hear kind of like, what, What's a day in life like for you? Like, what are you spending your time doing?

Well, with a two and a half year old toddler and another baby on the way next month. Life has been busy preparing outside of work. I love my family, they're great. But from a work perspective, a day in the life. One of the reasons I love investing is most days are different. Something new is happening, something is changing, and oftentimes there's nothing to do about it. But as we've just talked about, with people reacting to market Fluctuations, there is something to do about it in terms of how do you help people stay calm and stay the course? That's a huge part of our job. Once, once someone has kind of bought into how dividend investing can help them meet a goal in retirement, then it's really about managing the risk profile. And that includes both behavioral issues as well as financial issues like safety. So every morning when I wake up, I usually skim through Wall Street Journal and a few other sources I look to and just see like, hey, is anything interesting happened that would be getting the attention of some of our members? For example, a couple months ago, Johnson and Johnson stock plunged again because it was dragged into the opioid crisis. So if you hold Johnson and Johnson, you're probably like, oh my goodness, it's down 10% today. Should I sell? Is the dividend still safe? So there's kind of a never ending stream of questions that I don't know what the questions will be any day or week, but I do my best to find them and get in front of them before someone would do something they may regret by just reacting on emotions to a situation. So a lot of my time is spent actually in the weeds, staying up to speed on material events that affect the companies that I cover with research and that a lot of our members own and are interested in continuing to monitor as well, beyond just a little number on the screen on how safe the dividend looks. So the research process is really big for me. It's my background, I love doing it and it takes a lot of time to do thoughtful research. It involves a lot of digging. So that's my passion, that's what I spend most of my time doing. Otherwise, as our business has grown, you get more emails throughout the day too. People asking questions about all sorts of stuff, some entertaining, some not so entertaining, and we answer all those in house. We don't outsource anything. And I think people like being able to hear from us directly on issues they're wondering about. So those are oftentimes two of my biggest tasks. And then we'll spend time as well prioritizing what comes next for the service. So by maintaining that direct connection with our customers, it's oftentimes pretty easy to discern, like, hey, you know what, hearing a lot about this or people seem to complain about this problem. Is there a way we can address that or do that better with our service than we are today? And building out kind of short term roadmaps, I guess, that are aligned with the long term vision we have for the service. So it's really blocking and tackling. It's not too exciting, but it's really a lot of fun to be able to work on something that you're passionate about and to, to get emails from people that are happy with what you're doing and happy enough to refer other people to it too.

That's great. It's great to hear. So it sounds like there's core research, they're supporting your users and then you've automated this to some degree, your safety score and you're kind of. That's continually running in the background or how does that work? You just run it periodically.

It's kind of a hybrid system as well. So all of the website's data is updated and basically real time. We pay a lot of money to our vendor. A lot of money. They're great though. They provided us a lot of information we need and having that up to date and timely is critical. When it's so easy to go into your brokerage account, it's not like the East India company, right, where I have no idea what's happening, waiting for the boat to arrive at the dust stock. Now it's super easy to go into your brokerage account and see stuff changing. And that needs to be reflected on our website as well. So people can understand usually to do nothing. So with our website and our dividend safety scores, we're getting all the information up to date every single day. The question is their long term focus. You know, ideally our scores never change because we've accounted for risks that can happen in different industries and the different companies based on their financial profile. So scores very rarely change, even though we're looking at all the data every single day. And when they do change, it's often because there has been a material shift in the risk profile. Maybe a company made this huge acquisition and now the balance sheet is loaded up with debt, well, certainly if the dividend looked very safe before, it's probably not looking as safe today. So we'd go in and we'd change that. So I am the one who actually looks at every single dividend change. It's not all robo, it's kind of a recommendation system, if you will. So if it's telling me, hey, this company's dividend score looks like it should be downgraded because it took on more debt or earnings are declining to a risky level, it's paying out too much of its cash flow, then I'll go in, I'll get to investigate the situation and kind of make a Final call. So I think a lot of times it can be tricky to automate something like that without just losing the performance element and the quality. So it's a hybrid system and it's an area that we're spending a lot of time on. I mean, every single week I'm doing something related to dividend safety. So customers care about a lot about it too. And in the future, we, we'd like to explore different ideas of how we can make that information even more easily communicated and understood. So I can explain more if you'd like. That's kind of the high level.

No, no, no, this is, this is super helpful. I always think it's interesting to kind of, you know, when you, when you look at a lot of investors, if they're passive, they're like, hey, I just want to buy the whole world and have everything work out. But when you dive into, into the markets and then into companies, and then it's down to people and what actually happens. Returns are driven by individual innovation, hard work. You can't get away from the fact that what makes the market and our economy works is all this individual activity. So active is definitely a part of the world and innovation is a part of it. And identifying that is what makes and capturing that value is what makes our economy work. So it's always kind of cool to see how it translates for individual people and companies.

No, I think you're exactly right. And active absolutely has a place. I think the problem was there are too many active managers masquerading. They're basically passive managers, but charging fees like active ones owning 150 stocks. And when you do that, you're one thing. It's impossible to stay on top of your portfolio. And for two, unless you're really concentrated at the top, it's almost impossible to deviate from the passive benchmark you're tracking or competing against, especially net of fees. So I think there are just too many active managers. I mean, at one point, and maybe still true today, there are more hedge funds than there are Taco Bells in America. So it's just unbelievable how many people are studying the market. And a lot of these guys are really, really smart too. I had a chance to visit a fund out in New York a few years ago. I sent them some of my research in this huge packet. It was like $7 to ship the thing or whatever, because there's a few dozen managers that I just love reading about them. I totally respect their process. And they've got the decades of performance to prove they had skill Whether or not that can be sustained in today's information age remains to be seen. But, oh, man, the amount of diligence these guys do. So they're telling me, if you were to start out there as an analyst, you would study your first year. You might study, like, five companies, and you're working 60, 70 hours a week. So you're doing everything right. You're learning about their suppliers, you're talking to competitors, you're learning about their cost, everything. You're flying planes all over the world. And, you know, despite doing all that homework, they've not been able to, any given decade, pick like, all right, you know, this is a stock that's going to be our best performer over the next 10 years. And half their decisions are still wrong because the world is constantly changing. So no matter how much work you do, these guys are doing their absolute best to set the right price for a stock. The market is really efficient most of the time, not all the time. Like 2008, panics happened both at a company level and market level. But I think the active world is going to continue to favor managers like them who are truly active, that run a concentrated portfolio to set prices, and the rest will just go to kind of the lowest cost provider that'll track the market. So it's a healthy balance. I think that's ultimately going to be achieved at some point.

That's cool. To get your perspective. All right, well, look, I think we should wrap this up. Any key influencers or podcasts or. Doesn't sound like you're super active on Twitter.

Don't follow me. Yeah, it's kind of like Johnny Depp. But you have heard of me, right? Entire security. No, I don't think anyone's heard of us, really. We're just a little. A little nat. But in terms of influencers, like I said, I would refer people to just read up on some of these managers that I think are really skillful and have just an incredibly detailed diligence process. And there aren't a whole lot of them out there, in my opinion. But, for example, like, there's the Sequoia Fund out in New York. There's Harris Associates in Chicago, Vulcan Value Partners down South, and all those guys publish letters either quarterly or yearly. And it's really interesting to read some of their thoughts. And of course, we're not telling you the juicy inside analysis they've done, but just learning how they think and how they invest and even following some of their holdings. This is going to be more for the hobbyists, but A site you can use is whale wisdom, and it's free. You can pull up any of these managers. It's called a 13F. It tracks what they own. They have to report it to the SEC if they're over a certain size. And you can see it makes it really easy to see, like, oh, what did they buy? What did they sell last quarter? And it's kind of a cool insight. The other person I'd recommend following, and I don't know him personally, and there's actually not a whole lot of content out there either on him, but Pat Dorsey, he's in Chicago as well. He runs Dorsey Asset Management now, but he was a key piece in building up Morningstar's equity analyst team and developing their moat rating, which a lot of people are familiar with. And his. His view of the world and his approach to fundamental investing, I'd say, is. It really resonates with me. He. He also runs a very concentrated portfolio. In fact, I think he owns 10 stocks, maybe fewer. But he's. He's up to, I believe, half a billion in assets through management today. And again, a guy who really does his homework and puts his money where his mouth is by being truly active. So if anything you can find on Pat Dorsey, he also wrote the book, the Little Book that Builds wealth, which is a classic I read a long time ago, too.

Okay, cool. Yeah, I haven't heard of him. I'll have to check it out. Well, he's probably doing pretty well if he's taking a percent of assets and running 10 stocks.

I think Facebook is one of his biggest positions, like maybe 10, 20%, and they've been crushing it. So he's more than. He's probably been underpaid the last three years, actually.

Interesting. All right, cool. Any questions for me before we wrap it up?

I will ask you a question I really love. When we were first getting to know each other a few weeks or months ago, time blurs. You were telling me a little bit about how you were helping your mom think through some financial planning issues, and that's what kind of sets you down the path with new retirement. Great story. So my question is how. How did you position her to generate income back then? And is there something you would change now? And the follow up is why isn't she using Simply Safe dividends?

Great question. I would say that we didn't do nearly enough on the income side. It was really. When we first took on our situation, it was first about expenses and kind of. Right. Sizing her situation and getting her to A place of confidence. So, you know, what, what happened was we, you know, it was a multi year process, but we're kind of looking at, let's just her situation. I mean, she, she, she was, her income expense situation was upside down. So she was burning money and she was using credit cards to subsidize her life like so many people do. And so once she said we could help her, you know, we started looking at this and said, all right, look, we got to kill the credit card debt. Okay, well, you're, you're living in the 6,000 square foot house with two people on 10 acres of land. It costs a fortune to heat on all this other stuff. Do you really need this? And do you want to, you know, are there other places, like closer to town where you could have a kind of a much more manageable life? And so we went through this process of helping her kind of downsize right size and move to a smaller house. It was much less expensive. Freed up home equity, you know, in a much more walkable area. Freed up some capital. You know, there was some investing, but not strictly focused on dividend investing. And so in retrospect, you know, we, I think that would have been something we could have done for her, but she's kind of gotten to a place where her, you know, she can live decently on Social Security, Medicare, you know, we've subsidized her life to, to some degree as well. Our life has gotten, we've done some internal family transactions to facilitate things like around, around housing and stuff like that. That still lets us capture some of the return for some of our assets, but also helps her with her life. And you know, I think she's at a place where, you know, she's financially confident, so she's got enough income, enough assets, she understands her situation, she's not worried about it. And that's kind of unlocked the rest of her life. I mean, when you don't have that, and that's a big part of what informs what we're doing. We think a lot of people are spending so much time kind of worried about their money, the money side of this, that they can't think about anything else in their life. And the more that we can help people kind of get organized, see easy things to do, better to be more efficient, bring their costs down, use their assets better, get their income and expenses in line, and then take simple steps to try to make that better. If that's setting up a dividend income stream or some other kind of passive income stream through rentals or whatever it is, help them kind of get to that point of economic confidence, then they can do other things with their human capital, which is kind of the big secondary unlock for our business is like, okay, you know, there's a huge demographic wave that's been happening. 10,000 people a day turning 65, but they're living a lot longer. I mean the average person I talked to now that's 60 to 70 years old, you know, if they're reasonably healthy, they're going pretty strong. You know, they may not be working in the career they had when they were 45 or 50, but they still want to do stuff, be involved in the community, contribute. So we see kind of what we're doing is trying to help people get to that economic security so they can do these other things. But yeah, and learning more. With our users, it's like you have 2,000 customers. Well, there are. Think about how many people are out there. I mean, we have 70,000 users that are similar to yours and probably less than 5%. Right. Pursue a strategy like yours, but could many more benefit? Probably, you know, that's why we're talking to you, learning about this and you know, I'm interested in, I may fire it up, put together a portfolio. I probably will see how it performs. So yeah. So anyway, does that answer your question?

Yeah, that's really interesting. I mean, you guys are solving a big problem. I'm actually going to be talking with my parents soon just to go over some of the different options that are out there because it is really, really difficult, I think, to wrap your mind around all these different issues and it's stressful. I mean, time is not necessarily on your side anymore to make a mistake. And you know, your mom was really fortunate to have you and your brother there to help her think through some of these things. Because it's not necessarily rocket science, but when it's all combined like that and you don't really have a trustworthy place to go, it makes life really difficult.

So yeah, I think when you're in the space, you know, it doesn't feel like rocket science. But if you're a non financial person, like my mom was in advertising and then she was in real estate. But she wasn't necessarily like a financial. I worked for Schwab and Wells and I worked in financial services. So you kind of pick up a lot of things in doing this. But if you're like a DJ or something, or you're an artist or you're a writer, you're not thinking about money, you May not even want to think about it, you know, and so then it's like, who do you trust? Do you understand it? And so much of this industry is like people trying to win trust. And there's so many bad actors out there or people that are just, they feel like they're doing the right thing, but they're actually, you know, not that efficient or they're taking too much risk or their fees are way too high. That's the challenge, you know, helping people navigate that as the, as the opportunity, I think.

Yeah, it's like the balance we have to strike is a hard one because it's that thing of keeping it simple enough, simplicity to make it understandable and approachable and easy enough to follow, but then also keeping it thorough and detailed enough where it's being followed in the most responsible manner possible. And that's kind of a never ending problem.

Yeah, I mean, this comes up all the time. It's like, it's simple but not easy. You know, everything's like losing weight. Simple but not easy. Right. Getting in shape, all this stuff. Same thing here. All right, well, this is really good. So I'm going to just wrap it up. So thanks, Brian, for being on our show. Thanks, Dotto Robeson for being our sound engineer. Anyone listening? Thanks for listening. Hopefully you found this useful. Our goal at New Retirement is to help anyone plan and manage their retirement so they can make the most of their money and time. And if you've made it this far, I encourage you to check out Brian's site since simply SafeDividends.com and its service. Check out our site at New Retirement and our planning tools. And if you want to join our private Facebook group or follow us on Twitter, you can look for those things. Just look for New retirement on Facebook or retirement on Twitter. And finally, we are trying to build the audience for this podcast. So if you have a chance to leave us a review on itunes or stitcher or anywhere, we'd appreciate it. And also we read those and all questions, we try to work them into the show. Okay, so with that, we'll wrap it up. Thanks, Brian.

Thank you, Steve.