2022 is almost over, only a few days left. This time I will share a table of dividend growth performance since I first invested in IDX, because I no longer expect to receive dividends this year for IDX shares.
Dividends are my Ninja Way
From the start, one of the things that attracted me to stock investing was the potential to benefit from dividends.
I have previously written about living off dividends. You can read more clearly there about dividend growth simulation.
Dividends are very attractive to me, because I can potentially earn money without having to sell shares (my total holdings don’t change).
Second, in contrast to deposits or bond which is usually a fixed interest/coupon, dividends can grow. The growth of an issuer’s dividend is usually because the issuer’s profit is still growing. That is, the assumption of the DPR (Dividend Payout Ratio, namely the ratio of dividends to profits) is fixed, dividends will increase as profits increase. So if we manage to find issuers who are diligent in paying dividends while their profits are still growing, then in the coming years dividend yield what we get will be even greater, without us having to do anything.
Third, of course it’s interesting because I have the potential to still get fresh funds periodically, especially when the market is volatile.
Dividend Growth Table
“You can’t improve what you don’t measure.”
Peter Drucker
You can’t improve what you don’t measurehe said so, dude? 😎 So I always try to neatly record every transaction, including dividend income. If you haven’t read it, please also read how to calculate stock performance returns.
Here is one of the table which is important for me, Dividend Growth Performance Table total portfolio. I am grateful that so far my total dividend has been able to grow consistently. Several times, to be honest, there were issuers that paid out dividends beyond my expectations (hockey, dude), so the performance got better.
As you can see in the table, I calculated the total dividend, dividend yield to the current market value and to capital, what is the total cost (capital), Market Value, capital growth and total market value, and lastly div growth (dividend growth).
The table is censored 🙈, because I only want to show the “Dividend growth” column. This column only calculates dividend growth each year, i.e. compares total dividends this year vs. the previous year. For example, if in 2019 the total dividend is 1 million and 2020 is 1.2 million, then dividend growth = (1.2-1)/1*100% = 20%. Then if in 2021 the total dividend is 1.5 million, then for 2021 dividend growth = (1.5-1.2)/1.2 * 100% = 25%. And so on.
The total divisor (capital) should calculate all funds that are intended for investment. If your current position is 20 million in cash and 80 million in port, the total capital you are calculating should be 100 million, not 80 million.
I started investing in IDX stocks since November 2012, because it was too short and the initial funds were very small, so I just combined them and started calculating since 2013. The dividend table above is only the IDX portfolio. Even though I have started investing in SGX since 2018, and since 2020 I have started investing in US and HKEx, I have kept them separate so that one day I can evaluate each other’s performance.
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Mixing Porto for Optimal Total Dividend Yield
When concocting a portfolio, total dividend yield be one main goal. I make sure I get at least a certain percentage of the total managed funds. Total dividend yield became my initial priority when compiling a portfolio. The second focus is that I want the dividend to grow every year. After that, I started looking for other stocks.
For example, your current managed fund is 50 million and you want to earn at least 5%. So if you can find an issuer with a 10% dividend yield, allocate 50% of the port there, you will get a 5% yield (10% * 50% funds = 5% * 100% funds). In this case, if the total fund is 50%, invest 25 million in shares with DY 10%, you will get 2.5 million/year or the equivalent of 2.5 million: 50 million = 5%.
You can actually split this 25 million into several shares. It could be 1, 3, 5, or whatever. Be creative, dude! Feel free to mix it up yourself, in essence, the potential dividend is 5% (or whatever) of the total porto!
Capital Gain
Well, you still have another 25 million. These funds now no longer need to focus on dividends. You can look for other stocks that promise profits. For example looking for stocks cigar butt, growth company, turnaroundand others.
In this way, you still have the potential to enjoy dividend yield 5% and also the chance to earn capital gain. You can do both together.
Anyway, don’t forget, dividend stocks still have opportunities for capital gains. For issuers whose profits continue to grow, not only do their dividends grow, but logically their fair price will also continue to grow, and this means that there are still opportunities to benefit from an increase in their fair value. So even though your initial focus is on dividends, if you can get both – dividends and capital gains. 😎
Steps to Develop a Dividend Growth Portfolio
To sum upthe following are the steps to mix the portfolio so that dividend growth is optimal:
- Determine how many targets dividend yield what do you want. Is it 3%, 4%, 5%, or how much? It’s up to you, you decide for yourself.
- Start looking for issuers who are diligent in paying dividends, then calculate the potential dividend yield to your total portfolio. For example, if the total fund is 100 million, then you enter stock A with DY 10% of 20 million, this means a total dividend of 2 million. Then 2/100 = 2% dividend yield. Search again if it’s still lacking, and so on until your target is reached.
- As much as possible, don’t just focus on stocks with high DY, it would be better if there were opportunities to grow. As I mentioned before, one of the reasons dividends grow is that profits grow. So look for issuers that still have the potential to grow. In addition to growing dividends, issuers with performance prospects continue to increase, their share prices have the potential to increase as their intrinsic value continues to rise.
- Once achieved, you can focus on finding stocks with other profit potential.
- Periodic evaluation and review. Ideally, your total dividend will grow consistently each year. The total dividend growth comes from: increasing issuer performance (dividends increase as profits increase), you make reinvestments (use dividends to buy more dividend shares), or you increase capital (from capital gains or top ups).
Good luck!
That’s it, dudes. I hope this helps.
This post will most likely be my last post of the year. So, I would like to take this opportunity to say, “Merry Christmas and Happy New Year, dudes! Hopefully next year will be even better.” 🥳🥳🥳
