I’ve often wondered how well I can predict dividend growth and whether I can accurately forecast which stocks will have better dividend growth than others. It’s time to find out how good my picks really are!
I’m going to start tracking the dividend income return for the dividend stocks that I’m favorable on, and the ones I’m not so favorable on, and the stock price return that’s generated over time for these stocks.
I’ll make dividend growth and dividend income my main focus, but my thinking is that stock price appreciation should naturally follow dividend growth, so I’ll be tracking that also.
As an investor with a medium to long term horizon, I’ll be monitoring these stocks over a 5 year period (which, should coincide nicely with my $50k/yr dividend income goal, if things happen to work out!). There will be annual progress updates to see how things are going.
I’ll also look to test out my theory that select small caps and mid cap dividend payors can produce outsized dividend income and stock price return.
I’ll be finalizing the list of stocks to track in the next couple of weeks, but thus far, the candidates that I have are as follows:
Favorable Dividend Growth:
Chicago Mercantile Exchange (NYSE:CME), Quality Systems (NDAQ:QSII), Novartis (ADR: NVS)
Unfavorable Dividend Growth:
Johnson & Johnson (NYSE:JNJ)
Separately tracked will be some Mid Cap & Small Cap stocks. Currently, these are mainly Australian stock holdings, but I will be looking around for some relevant US companies.
Mid Caps & Small Caps:
Quality Systems (NDAQ: QSII), Big Air Limited (ASX: BGL), XRF Scientific (ASX: XRF), Energy Action (ASX: EAX), Clover (ASX: CLV).
Any others?
I’d love to hear from any of you if you have particular favorites that you’d like to be tracked also.
I’ll be updating my list of stocks to be tracked these next couple of fridays with the aim of finalizing this by the end of the month.
Thanks for stopping by and enjoy the weekend!.
I’ve been trying to come up with dividend growth projections that are based off actual results. I know I’ve seen a few people on SA that have posted about it and been pretty accurate with the results.
Like you I think some of the mid-cap companies could prove to be better investments because they have more room to grow which in turn means more DG in the future. I don’t want to get overweighted towards mid-cap or small-cap companies because they inherently bring about more risk but the growth potential is there.
It’ll be interesting to see how things turn out. Best of luck hitting $50k by 2018. I know I’d be calling it quits if I got there by 2018. I’d actually probably check out a little earlier because even $40k would give me about $20k in cushion over my expenses.
Hi JC,
Thanks for stopping by. Past results are a good place to start in terms of assessing future growth, provided there’s no deterioration in the business or no blowout in payout ratio. If these things are on track then predicting future dividend growth should proceed fairly smoothly based on whats happened in the past in my view.
I agree on your point about mid caps having increased risk. I think they have a place in the portfolio, but being overweighted could be bad for your portfolio if you haven’t selected them right. That’s why I really try to focus on mid caps that I think have good moats and solid cashflow and sustainable business models, but they are more risky than large caps, without a doubt.
The $50k is really an aggressive goal for me. I dont know about calling it quits, but that will definitely provide a lot of extra breathing room if we can get there in terms of not having to worry so much about job security, bills ,expenses. I’ll definitely be having a few drinks the day we hit $50k!