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What is better than reporting our dividend income results each month? For me it is reporting out our future dividend income.
Tracking our 12 month forward dividend income has quickly become one of my favorite updates I make each month here on The Money Sprout. This calculation represents the expected dividend income for all stocks found in the Money Sprout Index for the next year. Not the next calendar year but rather the next 12 months.
In order to calculate our future income, we take the number of shares we own for each stock and multiply it by the current annual dividend for the company. We run this simple calculation for each individual stock in our portfolio and then sum the results to get our 12 month forward dividend income.
An important item to point out is that since we are using the current yield in these calculations, there is no guarantee on this income. We are basing our future income on the current yield of a stock. The good news is that since we are selecting only the best dividend stocks for our portfolio, the chances for any dividend decreases or cuts is highly unlikely. In fact, there is an excellent chance most companies we own will increase their annual dividends which means even higher numbers for us!
Reporting 12 Month Forward Dividend Income
I decided about 3 months ago to start including our 12 month forward dividend income projections in our monthly results. While there is nothing guaranteed about future dividend income, I think it is important to show these numbers and watch our future dividend income projections grow. By estimating our future dividend income, we are able to take the necessary steps to reach our investment goals.
Here are the first three 12 month forward dividend income results that I have previously published in our income results updates.
- Update #1 (March 2015) – $1,239.21
- Update #2 (April 2015) – $1,288.31
- Update #3 (May 2015) – $1,501.44
Note – These numbers are now posted at the end of each month in our dividend income results. I like to do this to show the growth of our future dividend income from the new investments we are making.
As you can see from the numbers above, there was a huge jump between April and May, which was a direct result of investing most of our tax refund last month. The $213.13 increase in future dividends was a result of investing $4,000+ last month in new money into the Money Sprout Index.
My wife and I expect our future dividend income to grow by about $50 per month for the remainder of the calendar year. That would set us up nicely for next year to virtually be guaranteed to earn over $1,850 in dividend income. And that amount is with no action or new investments on our part!
If you have been following us here for anytime, then you know we will not sit idle investing new money next year. Our plans are to continue investing as much as possible each month (even in 2016 and beyond) into the Money Sprout Index. We also have plans to continue investing our tax return for many years to come (as long as we are getting a refund).
Combine all this new money with annual dividend increases from the companies we own and dividend income reinvested into new shares of stock and we can easily top $2,000 in dividend income next year.
Sure, $2K may not seem like a whole lot. But when you are building a sustainable (and growing) dividend income stream, that is a good chunk of money coming in. Especially considering that we did not even earn $1,000 in dividend income all of last year ($967.12 to be exact).
That just goes to show the power of compounding interest and investing early!
June Updated Future Dividend Income
Guess what? Our future dividend income has already grown a good amount since we last reported our May dividend income results. A combination of reinvested dividends, annual dividend increases, and new money invested has shot our future dividend income up to $1,551.65!
At the time of this writing today, our future dividend income has risen by another $50.21 in just a few weeks since last reporting our numbers. The good news is that we have over half the month of June remaining and more investments to make. There are going to be more dividends reinvested into new shares of stock and maybe even a few dividend increases coming in this month.
There is no doubt we will be able to increase our future dividend income by the time we report our June results!
June 2015 Future Dividend Income Projection – $1,551.65
The great thing about increasing our future dividend income is that is doesn’t just show up for one year. There is a very good chance we will get that same income the following year and the year after, etc. It is awesome to know that we can do absolutely nothing to earn that income!
There are certainly no guarantee’s that we will receive $1,551.65 in future dividends in the next 12 months. However, the chances are very good that we will earn at least that amount and probably more based on the companies we have invested in.
The companies that we have purchased all have a strong history of annual dividend increases. Even if one company were to freeze or even cut there dividend, there are several others that will make up for one bad apple. That is why it is important to diversify the number of dividend stocks we own.
Is there any better way to earn extra income than from dividends that grow from year to year? I certainly don’t think so!
Do you track future dividend income?