It seems some ways away to $50k/yr in dividends from $25k/ yr currently. But between organic increases in dividends paid and reinvesting those dividends, I feel I may have the beginnings of a plan to get there.
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2013 Goals
Existing Investments:
Firstly, for 2013, I’m expecting an effective dividend growth rate across my portfolio of 7.5%. That may seem high in the context of SP 500 average dividend growth of about 5.5%, but there’s a reason I expect slightly higher growth.
My dividend portfolio is made up of 60% large cap stocks, 25% mid cap stocks and 15% small cap stocks.
I expect my large cap stocks to increase dividends about 5% overall this year. Most of my large cap bank stocks increased by 5% last year, and I’m not expecting much different (better or worse) from them this year.
I’m expecting my mid cap stocks to do about an 9% increase. They have typically done greater than a 10% p.a increase. Mondalpheous alone averaged almost a 25% increase in its dividend last year.
My small cap stocks are the wild card. Many of them did a 25% dividend increase last year. I think its possible as a group that they will do similar this coming year, though I am budgeting a 15% increase in dividends from them.
Thats get me to an overall blended portfolio dividend growth rate of 7.5% this year.
Reinvestment of dividends
To meet my new years resolution of getting to $50k/ yr dividends by 2018, I’m planning to reinvest my Australian dividends into US and international stocks . For 2013, that will be a reinvestment of $25k dividends. I expect about an initial yield of about 4.5% and ongoing growth of 5%.
Some of the stocks that I am looking at for purchase are BP, Astra Zeneca, and Quality Systems (QSII).
New Investment
I’m not planning any fresh investment of capital into the dividend portfolio in 2013 beyond just the reinvestment of dividends I think I can get by without this for 2013, but its going to be required for subsequent years (2014-2017).
Plan to get to $50k /yr by 2018
Assumptions :
Current Div’s growth: I’m expecting that the natural organic growth in my dividend portfolio will be 7.5%p.a over these next 5 years. The higher rate of dividend growth will be driven largely by my mid cap and small cap dividends. Given their rapid growth, I expect the mid caps should be able to do 10% pa in dividend growth, with the small caps doing 15% p.a dividend growth. This should take my $25k to $26,875 by the end of 2013.
Reinvested Div’s : I expect that I can reinvest my dividends at an average yield of about 4.5%, and get growth in those dividends of 5.5% p.a over the next 5 years. This will probably mean looking at large cap US and international stocks, which are the only types of stocks that can get me this type of yield. Alternatively if I can find stocks that yield a little bit less (as low as 3.5%) but have higher dividend growth rates, they would also make the cut.
New Div’s. I figure I will only need new investment into the portfolio at the beginning at 2014. I will then plan to deploy $30K each year for 2014-2017 that will initially yield around 4.5% . I ‘ m expecting 5% p.a dividend growth on this new investment.
The table below shows how all the math breaks down:
| Year End | 2013 | 2014 | 2015 | 2016 | 2017 |
| Current Div’s | 26,875 | 28,891 | 31,057 | 33,387 | 35,891 |
| Reinvest | 1,250 | 2,569 | 4,054 | 5,830 | 7,820 |
| New Div’s | - | 1,500 | 3,083 | 4,752 | 6,513 |
| Total | 28,125 | 32,959 | 38,194 | 43,968 | 50,224 |
So for 2013, the goal is growth in existing portfolio dividends from $25k to $ 26,875, with dividend reinvestment contributing approximately $1,500 by end of year for a total 2013 dividend target of $28,125.
This post was an interesting read for me, as I also have a portfolio currently producing about $25,000 in yearly dividends, and I’ve also been wondering how much I could ramp that up in the next 3-5 years. It looks like I’ve got a lower current yield (3.5%) and a lower expected growth rate (5%) than you, but I also have the opportunity to substantially invest some new money in the next few years. Best of luck with your 2018 goal.
Hi S.B,
Thanks for stopping by. The amount of dividend income you can drive from the portfolio will be influenced by the nature of the stocks you own. I have much of my dividend income sourced from international stocks, which tend to pay larger dividends, and also from a variety of mid cap and small cap stocks, which I am expecting to be able to drive faster dividend growth. The combination of these factors produces what I hope will be slightly higher yield than typical while also driving faster dividend growth. Like you, I expect my large caps will only drive 5% dividend growth. Best of luck in hitting your dividend goals.
Take a look at: http://dripinvesting.org/Tools/Tools.asp
2 things in particular:
THING 1 – The U.S.Companies with 25+ Straight Years Higher Dividends
Excel Spreadsheet is a great tool
THING 2 – Look into the DCA calculators to help project futures given your inputs.
One additional thought … for those with a small Roth account or IRA account, low or non-dividend paying stocks may make more sense. Here’s why… if you have $10,000 of KO in a Roth paying ~2.8% % it spins off about $280/yr. At $8/trade it will be a while before you accumulate enough to buy more stock. As such, growth is more beneficial than dividends all other things being equal. In this case MA may make more sense since it pays ~0.5% yet may realize nice growth. Small amounts can be held in other investment products such as ETF’s until sufficient accumulation to justify the trade fee.
Good luck … I’m doing the same as well
Thanks for the comment and tools that you referenced Nick. I’ll check them out.
Hey Integrator,
In my projections for dividend growth inside my portfolio I figure a seven percent annual dividend growth rate. I feel like this is a conservative number for a diversified dividend income portfolio, with a mix of all size market cap stocks.
Larry
Thanks for the comment Larry. I also feel that 7% across a basket of stocks is achievable. Of course, I feel that my small and mid cap stocks have and will continue to experience moe rapid rates of dividend growth., probably closer to 10% or higher.