I want to live off dividends without selling principal, when I retire. My question is: I’m getting 18K off of my stocks now. If all the companies increase their dividends 8-10% every year, that means in 10 years it will be 36K. It doubles. Am I right? The companies I own are not preferreds, reits, and utilities. All are domestic large- mid cap, blue chip companies. Thanks in advance.
Jeremy Lvancevic: If all goes as planned, sure. Don’t panic and sell and you should be good. But make sure you have a plan B incase shit hits the fan.
Rusty Jackson: Are you reinvesting your dividends? If so, that’ll speed up the process
Jeffrey Smiley: Yes
Shawn Ewer: There is something called the rule of 72. To figure how long it will take for something to double. Divide the yield (in this case the increase) into 72. The answer is the number of years to double. So assuming a steady 9% increase EACH and EVERY year then the amount will double in approximately 8 years.This is WITHOUT reinvesting the dividends. If you do reinvest them then add the yield PLUS the increase and divide that into 72. So assuming 3 % yield AND 9% increase, if you were to reinvest the Divs for approx 6 years your div payout will double. 9+3/72=6
Bernie Klunder: Yes, 18K in dividends with an annualized 8% DGR will give you $35,982 in dividends in 10 years if they are DRIPed.
Mark Morelli: Yes.
Ralph Al: I doubt they will increase that muchBut yes over time for sureAlso that much money in dividends Wow that is great
Mark Morelli: If you reinvest dividends you can get 8% per year.
Ralph Al: But on dividends alone ?That is what he wrote
Mark Morelli: Yes growth of 8% per year.
Sue Weed: I am retired and my dividends are like icing on the cake. I still DRIP most of them.
Ralf Holger: … but the dollar will be only worth half ! 😀
Jeffery L. Elliott: Paper currency will be worthless in the not too distant future. The Government’s are going to debase their currencies to wipe out debt which will wipe citizens savings out.
Ralf Holger: Buy gold, silver and land !
Jeffery L. Elliott: Anything but paper assets.
Brian Fey: That’s being pretty optimistic. Increase are likely when economy is good, but can be cut when it’s bad. And we will be in a recession sooner vs later. I’m guessing later in 2019 recession likely.
Shawn Ewer: To make it simpler for all to understand and to make the math simple. The OP is asking how long will it take for his div payout to double without reinvesting them and when said dividend increases a steady amount every year. Let’s assume they are receiving $100 in dividends and they increase by 10% a year We start with $100After a year we have 100 + (10% increase ) =$110Now year 2 is $110 (last year) + (10% increase) = $121. I still haven’t reinvested yet it continues to increase$133$146Etc
Derrick Pizur: Yikes some of you guys need to keep your day job leave math to the egg heads
Jeffery L. Elliott: The Central Banks will do this literally overnight. They are not going to announce this debasement. That will cause riots and panic.
Tom Gianni: no…..don’t count your eggs before there hatched!
Char Renee: What companies do you own so I can be rich like Jeffrey Smiley
Jeffrey Smiley: I’m not rich, by far! Just frugal. My top 101. PEP2 JNJ3 AAPL4. JPM 5. UNP6. CVX 7 GD8. GOOGL 9. GOOG10. DIS
David Sami Martinez Joseph: Me2. Idk how
Coelho Zé: Should be over 50k by than
Coelho Zé: Stop scaring investors.. more wealth is lost by those predicting recessions than being in the market.
Botao Jiang: Which stocks increase dividends 8-10% each year??
Rusty Jackson: MO is usually 8%, except this year it’ll be 18%
Mark Morelli: Go the DRIP resource center and download the “CCC” list.
Ace Rothstein: If you’re gonna go tobacco stocks, check out PM. I like the international tobacco companies, everyone is Europe is a smoker! In America smoking is frowned upon! ?
Michael Morse: Well…don’t invest in BRK cause you can’t live off of nothing.
Neal Mattingly: You can make synthetic dividends by selling Call options.
Dave Shaheen: The spreadsheet below assumes a 9% div increase per year, all dividends are reinvested. It looks like you would double your dividends in 4 to 6 years depending on your original investment and div yield.
Shawn Ewer: That sounds like exactly what I said. Thanks Dave.
Dave Shaheen: Shawn Ewer , you were correct….
Shawn Ewer: Dave Shaheen appreciate it
Bernie Klunder: Come on guys. Dividend yields have nothing to do with dividend growth. Dividends increase, not yields, unless you’re speaking of yield on cost which isn’t used in DGR calculations either.
Dave Shaheen: Based on the limited data provided by the OP, the calculation was made assuming a fixed stock price. With a fixed stock price, dividend yields would increase with dividend growth. Obviously this is not practical, the stock price of a company increasing dividends at a 9% would increase, and dividend growth and dividend yield would be different.
Bernie Klunder: Dave Shaheen of course they would. The stock price will float as will the yield. In all reality the stock price will rise a significant amount if earnings, which fuel the dividends, rise. But, we don’t need to know the stock price, yield or invested amount here. All we’re asked here is to determine what the dividend will be down the road from info provided, ie; initial dividend and its growth. Its absurd to think the dividend yield will grow at the rate of the dividend growth. The earnings likely, the stock price maybe, but the yield…never!
Shawn Ewer: Bernie Klunder you are missing part of the conversation. The one poster removed his posts. He told me that I was wrong and he a an MBA but he was mistaken. Apparently as opposed to owning the error, he deleted his posts. Again the original question was answered. No need to reinvest the divs if they are increasing by 8%. They double in 9 years on their own. There were additional points of view and questions asked. Including how long if the divs increase at 8% and get reinvested. This is in reference to the secondary question.
Shawn Ewer: Bernie Klunder because of the limited information given we can use the yield increasing as a substitute to the other needed information. We just moved the variable to the other side of the equation. Look at my posts I show how the information is accurate and can be used. It may not make sense on its face but it is so.
Dave Shaheen: Bernie Klunder If you reinvest the dividend then the dividend growth AND dividend yield is needed to calculate future value. A example, you receive $10000 in dividends, the first year. You reinvest the dividends. At the end of the second year you would receive $10000 + (dividend growth * 10000) + dividend yield * the reinvested dividends from year 1.
Shawn Ewer: Dave Shaheen I am leaving this one to you. I tried over and over last night. Good luck sir.
Ace Rothstein: Throw some preferreds into the mix. Might I suggest COF.G, NNN.F, both trading below their par value of $25 and come with a healthy yield ?
Bernie Klunder: Nice yields but no dividend growth with preferreds.
Ace Rothstein: Yeah that’s true, preferreds compliment a nice stock portfolio. Especially if your goal is income, you have your dividend growth stocks that will give you a raise each year in addition to some preferred stocks. Gives you a little stability too in volatile markets, although they do fall in value as interest rates rise. You can get some preferreds cheap right now. Just an idea to boost income if that’s the main goal
Jeffery L. Elliott: We will see higher interest rates which will cause a huge currency crisis. Then, we are liable to see negative interest rates sometime in the very distant future
Dalton Lee: Buy on fear, sell on greed. Live life a little and take some risks
Michael Mast: I’m getting 18K off of my stocks now. (a month? a year? after taxes?)If all the companies increase their dividends 8-10% every year, that means in 10 years it will be 36K. – sounds logical except all companies don’t do that. It doubles. Am I right? – math wise, yes, logic and reason wise, no.The companies I own are not preferreds, reits, and utilities. All are domestic large- mid cap, blue chip companies. Thanks in advance. – Big fan of the blue chips.
Bernie Klunder: Michael, for sure very few companies maintain a 8-10% DGR, but if they did, your dividend doubles in 10years.
Bernie Klunder: Furthermore I know the rule of 72 is only a ballpark calculation. I prefer to do the math. Its presented above.
Shawn Ewer: You are not answering the question of both reinvestment and increase of dividend for crying out loud.
Shawn Ewer: Bernie I am going to try it this way. Using the rule of 72 (ballpark I know) if I get steady 8 % yield on an investment and reinvest the dividends the value of the investment will double in 9 years. That happening will cause the div to be double the amount we got in year one at that time. This is because it is a steady no wavering yield of 8%. This we agree on. Now if the dividend itself increases by 8 % every year, year in and year out, the dividend itself will be double the original amount in 9 years WITHOUT reinvesting. This we can also agree on. Now how long will it take if BOTH the dividend increases by 8 % year after year AND we reinvest the proceeds?I would love to see your answer to this question.Bet ya it is not the same answer you provided earlier.
Bernie Klunder: There’s not enough info to answer regarding the investment doubling so I can’t say. The author only asked about the dividend doubling. My calculation shows 8% DGRs with reinvestment of the increases. The dividend doubles in year 10. Year 1: Initial dividend= $18,000 – annual dividend increase= $18,000+8%= $19,440Year 2: Annual Dividend= $19,440 – annual dividend increase= $19,400+8%= $20,995Year 3: Annual Dividend= $20,995 – annual dividend increase= $20,995+8%= $22,675Year 4: Annual Dividend= $22,675 – annual dividend increase= $22,675+8%= $24,489Year 5: Annual Dividend= $24,489 – annual dividend increase= $24,489+8%= $26,448Year 6: Annual Dividend= $26,448 – annual dividend increase= $26,448+8%= $28,564Year 7: Annual Dividend= $28,564 – annual dividend increase= $28,564+8%= $30,849Year 8: Annual Dividend= $30,849 – annual dividend increase= $30,849= $33,317Year 9: Annual Dividend= $33,317 – annual dividend increase=$33,317+8%= $35,982Year 10: Annual Dividend= $35,982 – annual dividend increase= $35,982+8%= $38,861
Bernie Klunder: Sorry Shawn. I can’t answer all of your questions with the info given.
Shawn Ewer: Bernie Klunder I answered it already. It can be answered with my “flawed” as you called it math. Because we know if we are earning 8% yield today and the yield amount is 18,000 then the investment is currently $225,000.
Shawn Ewer: Bernie Klunder also I answered to OP in the 4th post in the thread. The question then evolved to how long if you reinvest the dividend and it increases each year by 8%. That is what I and Dave were answering.The answer is NOT what you said because you were not answering the evolved questionThe evolved question is not my question, (I answered it) but it is the question that you said my math was flawed. There for. I asked you to answer the question so that you could see the error in YOUR statement.
Bernie Klunder: Shawn, sorry if I appear rude, I just misunderstood your approach. After giving this much thought yeah you’re right that my calculation was dividends only and didn’t include reinvestment. Its tough to figure out what you ask without knowing or assuming more. What I’ve now done is route through the CCC list to find a popular stock which averaged 8% dividend growth and then determine their average total return. TR, being price + reinvested dividends should give us a better estimate on doubling the investment. Anyway PepsiCo (PEP) has DGRs of 8.8%, 7.7%, 8.5%, 8.9% and 10.7% over 1-Yr, 3-Yr, 5-Yr, 10-Yr and 18-Yr periods. I feel this is representative of the kind of stock we’re looking for. As it turns out their average annual total return is also similar at 8.56%. So, applying this 8.56% total annual growth the investment will double in the 9th year. Thats my answer to your question of how long it take if BOTH the dividend increases by 8% year after year AND we reinvest the proceeds. The 8.56% would include an average annual ballpark price return of 0.56% and 8% DGR.
Bernie Klunder: This has no bearing on what we’re trying to calculate but, for the record, PEP has a current yield of 2.86%. Its almost always in the 2.5% to 3.5% range. I believe the company ideally wants to keep it in this range.