I am of the opinion it isn’t enough to just set goals, but to track progress towards those goals, holding yourself accountable. Since starting WYOR, I’ve set goals three times, and have, albeit late at some points, publicly tracked my progress towards those goals. While public accountability is important for those inclined to blog, it is the act of tracking your progress and actively monitoring your goals that will carry you further. You can check out my 2014 Goals here.
But what to track and why? For someone like myself, this is a fairly straightforward decision as I blog about passive income generated primarily from peer to peer lending and dividend income. Each month I review the income produced by all of my investments as I continue driving and pursuing independence through the production of income. Of course, income is just one thing that can be tracked. Investments provide such a wide range of metrics in which to track your investments, that you can pick any one of many to base your goals on. An example of one metric used by those in the dividend growth community is forward 12-month dividends.
Calculating Forward 12-Month Dividends
As I alluded to above, forward 12-month dividends are one of the ways those investing in dividend paying stocks can provide a snapshot for the future dividend production of their portfolio. Boiled down, your forward 12-month dividend total is exactly that, a projection for the level of earnings your dividend growth portfolio will earn over the course of the next 12-months, without any additional contributions, reinvestment of dividend increases. While many fellow dividend growth bloggers track this metric as a goal, I currently do not. That being said, I do keep track of this metric and include this information in my tables reflecting my dividend growth portfolios.
The calculation process for forward 12-month dividends is fairly straightforward and takes just a little bit of portfolio maintenance to keep this updated as you make transactions. Using a small example portfolio below, you can see that I am taking the current number of shares owned per position, multiplying it by the current dividend and the number of payments in a year. The result of this is the projected dividends to be received by each position over the next 12-months. I’ve kept the portfolio fairly simple below, but this can be integrated into any Excel tracking file you might currently have or utilize.
Note that when you calculate your forward 12-month dividends, you are taking a snapshot of your current portfolio as it will change with reinvestments, dividend increases, additional purchases, and adjustments in the payment frequency (very rare). Effectively, this snapshot reflects the passive income your dividend growth portfolio will produce over the next year, a truly important calculation for those looking to gain financial independence through this method of investing.
When tracking your forward 12-month dividends, it can be a great feature to visualize how your portfolio is improving over time. Below is a chart of my forward 12-month dividends mapped against the actual dividends I’ve received over the last 14 months (January 2013-February 2014).
With regular contributions, reinvestments, and dividend increases, any dividend growth investor can see significant gains in their forward 12-month dividends and over time should see the trend line for their growth accelerate and increase at an exponential rate.
Do you track your forward 12-month dividends? What goal setting metrics do you find most useful?