Why I Share My Dividend Income Growth

I recently tweeted that my dividend income spreadsheet shows that the YTY growth is 103.02%. Let me explain why I show this.

Why is this important and should you even care? 

That was a question which my long-time blogger friend Mr.ATM asked. He said:

Each time a young dividend investor posts his astronomical dividend growth this way, it makes me cringe. I’ve said the same to . Long-term what is more meaningful is how much dividend is growing organically and how far/close it is to meeting your income goals

Let’s say I have one share of a dividend paying stock last year and I buy one more share this year. What would be the dividend growth? 100%. How often will I be able to double my total share count each year, year after year?

Should you care about me growing my dividend income?

Mr.ATM’s example is valid for sure and I also even cringe when others do the same. If you double your dividend account and grow your income from $10 to $20, that’s not really interesting for almost anyone. We are only talking about $10. Even though you increased your income by 100%, it’s not impressive at all.

But, it is interesting for one single person, namely you (in this case, me). Why? Because it shows

  • You are able to save money
  • You are able to invest in the stock market to achieve higher forward returns
  • You are going forward which is highly motivating, no matter how small your portfolio might be
  • You are seeing results
  • You have created a system to shift your focus away from stock prices
  • You are on your way to create a long-term mindset
  • You are trying to become a better and more patient investor
  • You are investing in high quality companies with sound dividend policy
  • You are not investing in scary high yield stocks that pay a lot one year and cut it the next year *and never make up for it

So for me and only me,  the growth of my dividend income does matter. 

But it shouldn’t really mean anything to you.

Remember, Stockles is my public investment diary. My goal with the site is to show how I think and what I do to stay patient and sane. If someone learns something on the way while reading then that’s amazing too.

What should you care about then?

The organic dividend growth is what matters, I know that.

That’s why I have included a separate part of my dividend income spreadsheat to organic dividend growth.

As you can see, my compounded annual growth rate (CAGR)  is around 6-8%.

If you want to take something out of the stocks in my portfolio, then it is just that. They compound at a rate around 6-8%.

How much I might make it dividend income matters dramatically.

US Dividend Policy

American firms and nordic firms see dividends very differently. American firms will try to do anything they can to not freeze or cut the dividend.

It’s even very common to use the payout ratio as one of the main measurements when trying to see if you should invest in the firm or not.

https://www.simplysafedividends.com/

What this means is that it’s likely that you will receive the dividend income you have today in the future too (given low payout ratio and EPS growth). Then it’s also much easier to calculate your dividend income and how much you need to invest in order to reach your dividend income goals

Nordic Dividend Policy

But Nordic firms don’t operate like that. They pay dividend based on the last 6 operating months and the dividend is often the first thing that gets eliminated. For a detailed look into this, I recommend reading my introduction to accounting. 

Payout ratio estimates about Marine Harvest from borsdata.se

What it all means

Being a nordic investor and having a nordic mindset, I don’t solely focus on dividend payment. I want my dividend income for sure, but if that decreases the firms ability to service and strengthened the long-term outlook, then I don’t want them to obsess about paying me a dividend.

Take $BUD, they recently decreased the dividend payment by 50% because they wanted to stay within their Net to EBITDA goal at around 2.0.

So why do I share my dividend income?

What I want you to see is

I do save money and I do invest in the market *dividend growth table

My income increases even though I do nothing *organic dividend growth

As my portfolio grows larger and larger, my yearly dividend income will become more normal and more comparable to the organic dividend growth. 

Untill then, I just have to invest more and more capital.

The next main milestone is now $5000 and then $10000 in yearly dividend income. 

And remember, this is my investment diary. It truly helps when you are a small investor to write down your thoughts and to see progress, even though if it’s just a few $100.

Take care,

Stockles

8 comments

  1. Like you have stated, I created my site and post information on my buys and progress as a snapshot in time for myself and what I was thinking / how I was evaluating things at that time. I’ve got a great deal still to learn and having a documented record will be helpful. While it is great if that information can benefit others, a lot of us really share it for our own growth and development.

    Thanks for sharing Stockles!
    DivvyDad recently posted…Chill For Best ResultsMy Profile

    1. Hi DD,

      Thanks for commenting. We all have so much more to learn about investing, and that’s maybe what I enjoy the most. The continious progress of learning and understand new concepts and ideas.

      Looking forward to seeing what you have learned this year!

  2. Hi Mr Stockles.

    I have the same thought like you. I have my own site. And i use it to writte down my buys and sells. Also to control my expenses and bills. Its like a diary.

    I read you hade around 25000 nok in dividend? I have around 18000 sek. Nok i stronger then SEK 🙂
    Hope the best for you.

    Ps if you have some cool norweagian stocks maybe you could writte them? I have some salmon stocks. Cheers from Swedish Dentist.

    If you have time check out my site and tell me what you think of it. Maybe some iprovments?
    swedendivin recently posted…Monthly dividend update for: october – 2018My Profile

  3. Interesting post Stockles. I tend to find value in reading other people’s reports, including the smaller sized portfolios. It gives me a sense of inspiration and motivation. But, I treat my own blog as my public diary as well. Of course, I hope that my posts are a value to others – otherwise, I could have just written them down on a book or on my computer without making them public. But, it is helpful to track where I’ve been and to see how far I am from meeting my goals.

    In terms of how to the report the dividend income, I’ll leave that to each person. I see value in both ways.
    Dividend Portfolio recently posted…Dividend Income Report – October 2018My Profile

  4. I can see how there is confusion. Most people who have a blog about personal finance are geared toward keeping track of their own investments or debt levels and working toward FI. Everyone keeps track differently. For a new person making pennies from dividends, putting in 1k fresh capital to make a few dollars will give an astronomically high growth percentage. Obviously that number is not sustainable and as the portfolio grows, the growth numbers decrease even though the actual increases are greater. So going along with our example, putting in 10k new capital into a portfolio of 1 million dollars, will only grant 1% growth even though we are receiving 10 times the dividends we were from adding 1k into a new portfolio.
    Dividend Daze recently posted…Dividend Update – October 2018My Profile

    1. Hi DD,

      True. It doesn’t show what people should expect to generate over the long run, but it is the actual increase right now, so I include it for personal motivation.

Leave a Reply

Your email address will not be published.

CommentLuv badge