The most rewarding aspect of being a dividend investor is watching your dividend payments grow year after year as the dividends are plowed into more shares of the company. I have set up an Excel spreadsheet that allows me to keep track of this dividend growth to give me both a visual representation of the dividends received as well as the yield I am currently earning on my shares.
What do I do with this spreadsheet? Do I use it to make investment decisions you might be asking yourself? The answer is no, not really. However, it does provide me with some justification that my dividend investing philosophy is strong and working. My hope is that the trends will continue out another 20 years and the visual representation of the yields my companies are providing will be nothing more than mind-blowing. Even if share prices stay flat for the next twenty years, I know that I will continue to receive this every increasing stream of dividend income.
Here is the spreadsheet and below it is a description of each section.
Section 1 simply represents the initial yield that I received upon my first purchase into the stock. For Royal Bank, when I made my first purchase, I was buying into the stock with a yield at 2.92%. It is the initial buy price divided by the current dividend per share at the time.
Section 2 is where it gets exciting. This is now the current yield I am earning on the initial investment and all other subsequent purchases and reinvestments of dividends into additional shares. It is calculated from simply recording each and every purchase that I make of the stock, including reinvested dividends. From this I end up with a number of shares and a total dollar amount invested. The dollar value invested divided by the number of shares gives me my average purchase price for the stock. In my Royal Bank example, my average price paid for the shares I own is $32.44. I do not take into account commissions in this calculation – I probably should to be more representative of my actual cost per share. I made the decision awhile back not to because I was not using this to make any decisions, just to show how my dividends are working for themselves.
Section 3 is the annual dividends I receive from a particular stock. In my Royal Bank example, I receive $401.26 per year in dividends from the company. It is calculated as the number of shares by the current dividend per year.
Section 4 is where all the purchases and reinvestment transactions are completed. I use Microsoft Money to manage my overall portfolio and all the pertinent transaction costs etc. This is just the number of shares, the price per share, and the total invested.
This section is a graphical representation of the dividends I have received each time a transaction is made. It is going up, which is cool because it shows that every time I reinvest those dividends into more shares, the next time I receive a dividend it is higher than last time. That is where the real power of reinvested dividends comes into play.
Making the effort of creating the spreadsheet to do this tracking has been very worthwhile. As I have stated, it does not help me make my investment decisions but it does provide me with some insight into the growth of my dividends which helps me stick to the plan and motivates me to keep going. This has been especially helpful in a market like the one we were just in.
(Photo Credit: Rodolfo Clix)Google+