Hi Guys! Welcome to All About Interest.
I graduated college broke and without a job waiting for me. Sound familiar?
I was working hard but not making enough to save anything.
I had to change something!
So I created this blog to hold myself accountable for my financial decisions.
I’d love to share my story of how I was broke out of college to becoming a millionaire.
I have built a portfolio of dividend paying stocks as well as rental properties to boost my passive income.
Find the full version of my story on my ABOUT ME page.
Here are a few articles to get you started:
Part 1. Getting Started
Why I’m a Dividend Growth Investor
Create a budget
A Penny Saved is a Penny Invested
What Kind of Investor Are You?
The Role of Compound Interest in Your Portfolio
Create a Business Plan, mine is here
Opening a brokerage account
Roth IRA or Traditional, Which is Right For You
Importance of the DOW Jones Industrial Average DJIA
Part 2. Investing in Dividend Paying Stocks
Stock Selection
Why a Market Crash Is Not So Bad
Weight vs Dividend Weight
Dividend declaration, ex-dividend, record and payment dates explained
What is a DRIP?
Should I Selectively Reinvest?
Diversifying Your Portfolio
Part 3. Investing in Real Estate
How I Bought a House to Save Money
Calculating a cash-on-cash return
The 1% Rule
Invest for Cash Flow or Appreciation
Part 4. Dividend Strategies
Dividend Growth VS Dividend Yield; Which is better?
Options Trading – Introduction to Options Part 1
Part 5. Tracking Your Investments
Online Finance Tracking Tools
Simple Google Docs Portfolio
Part 6. Researching Companies
The CCC List
Use your Brokerage Account
Morningstar
Helpful Links
Using Google Docs for Your Portfolio
Dividend Growth vs Dividend Yield (.xlsx spreadsheet)
David Fish’s CCC List
Nasdaq Dividend History
Google Spreadsheet Function List
Bankrate’s Loan Ammortization Calculator
Finviz Stock Screener
AOM Stock Screener
Historical Dividend Data
Compound Interest Calculator
Foreign Tax Withholding Rates by Country
Open Site Explorer
TwoMargins – discuss company financials
Article explaining differences in: RDS.A/RDS.B , BBL/BHP
Definitions
CAGR/DGR – Compound Annual Growth Rate/Dividend Growth Rate. See Ex. 1.3.
Current Yield – The current annual dividend divided by the current price of the stock.
DGR – Dividend Growth Rate
Rule of 72 – Divide the current interest rate of your investment into 72 for a good approximation on the time it takes to double your investment.
YOC – Yield on Cost -The current annual dividend divided by the average cost per share. See Ex. 1.1.
Examples
Ex. 1.1 – Calculate YOC
I purchased 100 shares of XYZ Company at $10 per share. XYZ pays a dividend of $0.40 per share annually (or 4% at this price). XYZ’s price rises to $16 per share and dividends increase to $0.50. XYZ’s current dividend is .50/16 or 3.125%. My YOC is $0.50/$10 = 5%.
Ex. 1.2 – Calculate an n-year YOC using the DGR
What is the 10-year YOC of XOM assuming current yield = 3% & DGR = 8%.
nth-year YOC = (1+DGR)^n * Current Yield
so a 10-year YOC = (1+DGR)^10 * Current Yield
==> (1+.08)^10 * 3 =6.5.
Ex. 1.3
Let’s calculate a 5-year CAGR for Hasbro (HAS)
Let a = “annual dividend for starting year” (in this case 2006) = .45
Let b = “most recent annual dividend” (in this case 2011) = 1.15
Let i = “interest rate”
Let t = “time in years” (5 in this case)
a * (1 + i )^t = b
=> .45 * (1 + i )^5 = 1.15
=> (1 + i )^ 5 = (1.15/.45)
=> LN (1+i)^5 = LN(1.15/.45)
=>5 LN (1 + i) = LN (1.15/.45)
=> LN (1 + i) = [LN (1.15/.45)]/5
=> LN (1 + i) = .18765393
=> (1 + i) = e^.18765393
=> 1 + i = 1.2064
=> i = .2064 or 20.64%
To find a general formula for an n-year CAGR let’s use from above:
i = { e^ [LN (b/a)] / n } – 1 (where n is the n-year CAGR)
i = [ (b/a) ^ (1/n) ] – 1
So the CAGR is the ratio of your ending year dividend to your starting year dividend to the power of 1/n then you subtract one, where n is your n-year CAGR.
From investopedia:
