It should hopefully come as no surprise at this point that I love spreadsheets, as I have recently made adjustments to my dividend spreadsheet to track monthly stock performance and annual forward dividend income.
As I read blogs across the DGI community, I always keep an eye out for how people track their portfolios and look for new features that I can incorporate into my spreadsheet.
Recently, I was reading the quarterly review from FerdiS over at DivGro and noticed something that I wanted to add.
The payback percentage is the amount of your investment into each position that has been recouped through the dividends that you have received since your original purchase.
It is a simple calculation, boiled down as follows:
Dividends Received / Cost Basis = Payback %
The utopia that we seek as dividend growth investors is when a position surpasses the 100% payback threshold, as this means that we are essentially playing with “house money” at that point. Our original investment has been fully recouped through dividends.
As a means of full disclosure, tracking the payback percentage is essentially for informational purposes (I considered saying entertainment, as I do love tracking data) as this typically will represent the amount of time that you have been holding a particular position followed by the level of dividend yield.
Tracking My Payback Percentage
Recognizing the point above, here is what my current portfolio looks like in terms of the payback percentage.
Digging into the details a little, I have made the following observations:
- It does not surprise me to see Apple, AbbVie, and Abbott at the front of the pack because I have held those positions for quite a few years. In all fairness, the payback percentage should actually be higher than represented here because I only went back to 2017 to record historical dividends in my spreadsheet. However, it is nice to see each of these on their way to paying me back.
- The handful of REITs at the far left have not returned anything as of yet. Having just established my REIT portfolio last month, the dividends have just started to trickle in now. On the bright side, as these REITs have much higher yields than most of my portfolio, I expect to see them move up the chart rather quickly–as an example, look at IRM near the right after just one dividend payment.
- Moving past the REITs, you will see a number of positions that have relatively low yields. Snap-on Incorporated is the lowest non-REIT and that is in part due to their sub-2.0% dividend yield and also because until my recent purchases I only owned 5 shares. With the lower yielding stocks, they typically have higher growth rates though so that will help move them along.
By tracking this information, it may help identify laggards in the portfolio and provide an additional data point when evaluating positions to add to or possibly even trim.
While adding a payback percentage tracker to your dividend spreadsheet will largely be informational, it does offer some potential value when looking at the bigger picture.
It is extremely easy to add this type of chart to your spreadsheet and is based on information that you’re most likely already tracking–namely the total dividends received per position and your cost basis per position. With that information available, it only takes a few clicks of the mouse to add this handy chart.
Are you tracking your payback percentage?
Do you have any positions that have reached the point of “house money”?