Weekly Newsletter   Challenge account


Cost basis and income in various accounts over time

As I keep closing the books (so to speak) and analyzing my trades and accounts for the year, here are additional metrics I like to watch in my accounts.

I like to see what would happen to my dividend holdings if I keep holding them for the next 20, 25, and 30 years.

As you know, I like to invest in dividend aristocrats. Although the 2020 year was really bad when many good stocks were forced to cut their dividends due to covid, I still like being paid while holding the stocks. If you are a dividend investor, you may be familiar with YOC (yield on cost). This metric pretty much tells you how much a company will pay you in dividends in the future based on their dividend growth and your initial investment. Here are the estimates for our accounts:

 

 · Account #1

 

Initial data as of January 1, 2021:
 

Shares owned: 403
Cost per share: $30.94
Current yield: 3.51%
Dividend growth: 3.45%

 

If I keep holding our current shares and never sell them, we will experience the following YOC and dividend income:

 

YOC in 20 years 31.26% Annual dividend Income: $3,897.21
YOC in 25 years 71.11% Annual dividend Income: $8,865.33
YOC in 30 years 190.42% Annual dividend Income: $23,739.79

 

 

 · Account #2

 

Initial data as of January 1, 2021:
 

Shares owned: 532
Cost per share: $35.85
Current yield: 5.76%
Dividend growth: 11.37%

 

If I keep holding our current shares and never sell them, we will experience the following YOC and dividend income:

 

YOC in 20 years 959.63% Annual dividend Income: $183,023.70
YOC in 25 years 15,040.54% Annual dividend Income: $2,868,579.84
YOC in 30 years 731,690.07% Annual dividend Income: $139,550,267.90

 

 · Account #3

 

Initial data as of January 1, 2021:
 

Shares owned: 510
Cost per share: $60.80
Current yield: 4.05%
Dividend growth: 7.52%

 

If I keep holding our current shares and never sell them, we will experience the following YOC and dividend income:

 

YOC in 20 years 73.79% Annual dividend Income: $22,879.25
YOC in 25 years 249.32% Annual dividend Income: $77,303.90
YOC in 30 years 1173.89% Annual dividend Income: $363,975.12

 

Of course, this assumes that I will not be adding more shares in each account, no dividend cuts, or similar events. I plan on adding more shares, more investments, and holdings. I also plan to trade options against those shares and that would add more income over time.

Let’s see how these calculations change over 2021 and what we will achieve at the beginning of 2022.





2 responses to “Cost basis and income in various accounts over time”

  1. JC says:

    Compounding and time really are your friend. I’d be very interested to see the holdings in account 2. That’s really impressive to see nearly a 6% yield but growth of 11%.

    • Martin says:

      I use 1 year growth year from Guru focus website and recalculate this every year. I own a few stocks which have a growth year of 10% (ABBV), or 50% (MA). If I use 5-year average growth, the YOC will drop, for example, MA\’s 5 yr dividend growth is 18.6% but 10 years growth rate is 41%. The YOC calculation uses a 1-year growth rate to calculate future growth of the YOC so I felt it improper to use the 5-year average for 1-year formula. So, this result is changing every year based on the stocks\’ dividend growth.

Leave a Reply to Martin Cancel reply

Your email address will not be published. Required fields are marked *