How to Grow Dividend Income – December 2016 Updates

A few months ago, my wife and I decided to get serious about raising our annual dividend income.

In 2016, we were very close to earning $2,000 in dividend income. While we are very happy with those results, our goal is to continuing growing this income stream.

So … we set a goal to push our future dividend income up to $3,000 by the end of 2017.

Note – Our actual dividend income will not reach $3K by the end of next year. We will likely earn close to $2,500. However, our forward 12 month dividend income is what we are trying to increase.

Here is a recap of our December results of growing our dividend income.

Grow Our Annual Dividend Income – $3,000

We have a goal (set back in October 2016) to grow our forward annual dividend income to $3,000 by the end of 2017.

At the time we decided on this new goal, our estimated annual dividend income was $2,100.

So in 14 months, we need to increase our future dividend income estimates by approximately $900. That may not seem like a lot, but it will take a lot of capital to reach this goal.

Based on an aggressive yield on cost (YOC) of 4.50%, increasing our dividend income by $900 would require $20,000 in new investments over that time.

That averages out to about $1,430 in new investments per month – which is a little over 26% of our income.

These figures assume several things.

First, we are assuming the $2,100 in future annual dividend income is safe. This means that companies that we own will not make any dividend cuts.

Second, these calculations also assume that a combination of new investments, dividend reinvestment, and dividend increases will help us maintain a 4.50% yield.

December 2016 Investments

Instead of tracking our savings each month, we will track the investments we are making. This will give us a monthly snapshot of how close we are to hitting our target of raising future annual dividend income to $3,000 by the end of 2017.

During December, we invested new money into 5 different stocks. We purchased 2 stocks in our LOYAL3 account (AAPL and TGT), while we bought 3 stocks in our Robinhood account (AFL, CSCO, and OHI).

I plan to add additional detail to our purchases in our December dividend results post, but here is a quick look at our investments.

Try and pay close attention to the “annual income” numbers I have provided. This income represents our estimated dividend income increase for the next 12 months.

  • $150.00 in Apple Inc. (AAPL) – $2.95 annual income
  • $1,129.56 in Aflac Inc. (AFL) – $27.52 annual income
  • $178.13 in Cisco Systems (CSCO) – $6.24 annual income
  • $361.59 in Omega Healthcare Investors (OHI) – $29.28 annual income
  • $150.00 in Target Corp. (TGT) – $4.63 annual income

Overall, we invested $1,969.28 in new shares of stock in December. This has increased our forward annual dividend income by $70.62.

The yield on cost for these new investments is 3.6%.

Note – Yield on cost for new investments is usually low as they have not had time to compound. On the other hand, stocks that have had time to grow will have much higher returns – like our 10+% yield on one of our stocks.

Our new investments picked back up in December and made up for our shortfall back in November. We invested $539.28 more than our goal ($1,969.28 – $1,430.00). This difference will help to offset the $338.69 we were short in November.

Here is a recap of the monthly totals since we set our goal to reach $3,000 in future dividend income by the end of 2017 –

  • November – $1,091.31 invested ($28.34 future annual income)
  • December – $1,969.28 invested ($70.62 future annual income)

Total new investments = $3,060.59

Total Future Annual Income Increase = $98.96

Average Yield on Cost (new investments) = 3.23%

Note – We are now $200.59 ahead of our investment goals.

Updated Annual Dividend Income Estimates

When we set our original goal back in October, our estimated annual dividend income was $2,100. So … we will need to increase this amount by $900.

At the start of December, our estimated annual dividend income was $2,147.40 (after November investments). The goal by the end of 2017 is to push this number up to $3,000.

Our updated annual dividend income estimates at the end of December rose to $2,224.51. That is a $77.11 increase last month.

December 2016 Annual Dividend Income = $2,224.51

Of the increase, $70.62 was a result of the new investments we made. The remainder of the increase ($6.49) came from reinvested dividends and company dividend increases.

Remember … dividend income will grow from 3 different sources

  1. Reinvested Dividends
  2. Dividend Increases
  3. New Investments

On average, we need to try and increase our future dividend income by $64.29 each month. In 2 months, we have increased our future dividend income by $124.51. We are behind by $4.07 … which isn’t too bad at this point.

Conclusion

I would say that we are right on track with our investment goals.

January will likely be a down month due to holiday spending back in December. We also had to pay our property taxes and car insurance last month, so our available dollars to invest will be less next month.

Later this spring, we also plan to invest most of our tax return (which we typically do each year). This should help to offset any future shortfalls we may have.

After a good first two months hitting our goals, we look forward to a great 2017 and hitting our target.

How much of your income do you invest? Are you looking for opportunities to cut expenses in the new year to invest more? Or are you planning to increase your income to invest? Or maybe both?

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