How Much Dividend Income Do We Want to Earn in 2017?
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It’s that time again where we set our goals for annual dividend income.
Just last year (2016), we earned an extra $1,918.16 in income from owning dividend stocks.
We currently own shares of stock in 29 different companies that pay a dividend. This portfolio is commonly referred to as The Money Sprout Index.
Overall, this portfolio has been our most successful source of side income.
Since dividends are a major piece of our overall multiple income source strategy, it is important that we set future goals. These short term goals will help my wife and I plan ahead so that we stay on target for even longer term goals.
Our long term goal is to eventually earn $2,500 per month in dividend income (or $30,000 annually). This is a multi-year process and 2017 will be yet another stepping stone to reaching this goal.
In the short term however, we need to set a goal for 2017.
Below you will find our dividend income goals for the upcoming year, along with our plans on how we can get there.
2017 Dividend Income Goals
In 2017, we would like to increase our annual dividend income to $2,400. That would be a 25% increase compared to 2016.
In order to reach this goal, we must continue to make investing in the best blue chip stocks a priority.
Here is a look at our past dividend income results (2011 – 2016), along with our projected annualized dividend income for 2017.
2017 Dividend Income Goals
|Year||Dividend Income||Percentage Increase|
Last year (2016) we missed our dividend income goal ($2,250) by $331.84. Ouch!
Actual dividend income came in at $1,918.16. Still a great year, but well short of what we had planned on.
There were several factors that caused us to fall short of our target.
First … we set a goal that was very aggressive. Ideally, we should have set our goal about $100 – $150 lower.
Second … We didn’t invest as much new money as what we had planned. Investing wasn’t always our #1 priority for our income in 2016 … and it shows in our results.
Despite missing our target, we feel very comfortable with our projections of trying to earn $2,400 in 2017.
It is still an aggressive goal … but one that is certainly attainable.
Provided we stay on pace with new investments and continue reinvesting dividends back into additional shares of stock, we have a good chance of meeting our goal.
Growing Our Dividend Income
In order to reach our goal of earning $2,400 in dividend income in 2017, we will need to work hard growing our portfolio.
Growth in our portfolio growth will come from the following 3 sources –
- Company Dividend Increases
- Dividend Reinvestment
- New Investments
Based on our current yield on cost of existing shares of stock, I have estimated that we would earn a minimum of $2,225 in the next 12 months.
I often refer to this value as our 12 month forward dividend income.
This calculation is based on all the shares we currently own as well as each of the company’s current dividend. We assume there will be no dividend cuts and at a minimum each company maintains their current payout.
That is certainly a great starting point. Our baseline does not factor in any company dividend increases, reinvested dividends, or new shares added to our portfolio.
1 – Company Dividend Increases
Every company that we invest in typically raises their dividend annually. This means that we get a raise for doing very little work.
This is the easiest way to grow our portfolio.
When we screen stocks for our portfolio, we typically look for companies who have a 10 year dividend growth rate average of 6% or higher.
Not every company is going to raise their dividend by 6% a year. However, we own several that have growth rates way above 10-15%.
So averaging this out, we can estimate a 6% growth in dividend income this year from company dividend increases.
I figure we can count on about $100 in additional dividend income this year from company raises.
Again … just an estimate.
2 – Dividend Reinvestment
The second way we will increase our dividend income in 2017 will be through reinvested dividends.
Do you know what we did with our $1,918.16 in dividend income last year? Yup … it all got reinvested into new shares of stock.
About 50% of our stocks are setup to use dividend reinvestment plans (DRiP). Using DRiP’s over years has allowed us to really build a solid foundation of dividend stocks.
For example, over the past 8+ years – we have been able to add 12 shares of Consolidate Edison through DRiP.
It doesn’t happen overnight … but reinvesting those dividends will pay off down the road.
The other half of our stocks are held in brokerage accounts where DRiP is not available (LOYAL3 and Robinhood), or where it doesn’t make sense.
For these stocks, we let our dividends stack up and use the funds to make additional investments.
It is hard to estimate … but we can probably expect another ~$35 or so in dividend income this coming year from reinvestment.
3 – New Investments
This is where the real growth in dividend income will come this year.
Back last October, we set a goal to increase our 12 month forward income to $3,000 by the end of 2017. In order to hit that mark, we need to invest a little over $1,400 per month this year.
If we are able to come close to investing $1,400 per month on average this year, we should be able to push 2017 dividend income up by over $100.
This would certainly be much higher if we were able to invest the entire amount at the start of the year … but that won’t happen. So we won’t earn a full years worth of dividend income on these 2017 investments.
So … combining a combination of company dividend increases, dividend reinvestment, and new stock purchases – I think we will come close to hitting our $2,400 target.
When it comes to setting annual goals for dividend income … we learned a good lesson in 2016. We overestimated what we thought our dividend income “could” be.
This isn’t to say that last year was a failure. Earning almost $2,000 in dividend income is pretty cool I think. But we also know that we can do better.
We need to continue to make investing in dividend growth stocks a priority. This will allow us to continue to grow our income and let compounding interest do its thing.
Based on our goals, we expect to have another awesome year in 2017 building our portfolio.
What goals have you set for your dividend income portfolio this new year?