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.
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).
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
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:
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.