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One of my favorite hobbies (or obsession as some may call it) is to track our 12 month forward dividend income. This number represents the expected dividend income for all stocks found in the Money Sprout Index for the next year.
The calculation takes the number of shares we own for each stock and multiplies it by the current annual dividend for the company. This simple calculation is run for each individual stock and then the results are summed to get our 12 month forward dividend income.
Now, the current yield is no guarantee for future dividends, so I am making the assumption it will be the same. In reality, the yield should be more since we are investing in companies that have a solid history of raising dividends each year.
Reporting 12 Month Forward Dividend Income
In my last two dividend income reports, I have started including updates to our 12 month forward dividend income results. I think it is fun 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 two 12 month forward dividend income results that I have previously published.
- Update #1 (March 2015) – $1,239.21
- Update #2 (April 2015) – $1,288.31
As you can see from the numbers above, we increased our future dividends by almost $50 between the first two months. If we are able to sustain these increases each month, we would see our future dividend income rise by $600 this year!
At the time of this writing today, our future dividend income has risen even higher to $1,344.90! That is a $105.69 increase in less than two months.
I plan to continue to update our future dividend income in my results each month. This month is not over yet, so there is a good chance our results will grow even more before the next report comes out in a couple of weeks.
The great thing about that extra $100+ is that there is an excellent chance we will get that same income the following year. To make it even better, we will get that same income next year (and the year after and so on) for doing absolutely nothing! That’s right – absolutely nothing.
In fact, based on rising dividends and reinvestment, it is likely that the extra $105.69 will jump to $120+ next year. Or maybe $140+ the next. I don’t know how much of a jump we will see, but I know that an increase is probable and we don’t have to do a thing.
Even if we stopped investing any new money into the market today, our future dividend income would continue to rise. That is because the companies that we have invested in continue to increase dividends each year. Anytime a company increases their annual dividend, our future income increases.
In addition to rising payouts, we are also reinvesting most of our dividends back into additional shares of stock. Also known as a DRiP, this tool helps us increase our future dividend income. The only time we don’t reinvest is when we earn income from shares held in brokerages that don’t offer DRiP’s.
Note – Shares owned through LOYAL3 and Robinhood are not reinvested back into new shares. Instead, this money is added to our cash balance and is eventually used to purchase new shares.
Are we guaranteed $1,344.90 in dividend income over the next 12 months? No – there are no 100% guarantee’s on future dividends. However, the chances are very good that we will earn at least that amount and probably more.
We continue to build a diversified portfolio of top dividend stocks. 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. This is why I feel so confident about our future dividend income projections!
On a final note, if I were to predict our future dividend income by the end of this calendar year, we should be at $1,700! The following year should end around $2,300 or higher.
I ask you – is there any better way to build a solid income stream that pays year after year for doing a little upfront work and not much after? I don’t think so!
Do you track future dividend income?