Fun With Charts :: Shares Required vs. Shares Owned

Fun with Charts - Spreadsheet Charts

After sharing my love for spreadsheets when forecasting projected annual dividend income, it should come as no surprise that I have recently been tinkering with my dividend portfolio spreadsheet.

While doing so, I was reminded of Sheldon Cooper’s “Fun With Flags” scenes on Big Bang Theory and therefore I bring you…

Fun With Charts.

Did everyone else just see the fireworks and hear the bells and whistles?

If not, please know that I feel a little sad for you as you’ve yet to embrace the joy of spreadsheets; but enough of that, on to the fun stuff!

Changing Perspective on Dividend Portfolio

Since I started my dividend portfolio in May of last year and built my core set of holdings, I have been focused on adding to positions that have attractive entry points.

Not only that, but I have been making a concerted effort to build the portfolio in as balanced manner as possible without letting any one (or more) position get too far overweight. Often times my dividend stock watch list will feature positions that are underweight as well in an effort to build those positions.

When looking at underweight vs. overweight positions it is done in the context of a percentage of the overall account value.

For example, if my account holds 25 stocks I would want each stock to represent no more than ~4.0% of the portfolio to keep each position equally weighted. If you held 50 stocks, each would represent approximately 2.0% of your portfolio.

Based on what I have seen, this is how many across the DGI community weight their portfolios.

But have you ever considered a different perspective?

Portfolio Weighting By Dividend Income

Another way to think about your portfolio weighting is by the percentage of overall dividend income rather than account value.

While in some cases this will result in very close weightings, there will definitely be outliers as it will be influenced based on the dividend yield and the dividend growth rate.

This got me to thinking and I started tinkering with my spreadsheet to see what I would need to do if I wanted each and every position in my portfolio to produce a given amount of dividend income on an annual basis.

Looking at it from this perspective, I pulled some data together and made a few calculations.

How Many Shares to Earn $500 in Dividends?


Now I have a chart that demonstrates how many shares I need to own if I want every position in my portfolio to produce $500 in annual dividends.

Taking that one step farther, I definitely want to understand how close I am to that goal of reaching a particular dollar amount in annual dividends for each position and included the number of shares I currently own for each position.

I’ve represented this information using the following formula:

Desired Annual Dividend / Current Annual Dividend = Shares Required

While the chart above gives a visual check on the progress towards the goal, the chart below represents the data in a slightly different format and demonstrates the progress towards the end goal.

Progress Towards Dividend Goal

Here you can see that there are two positions that have already exceeded the goal of $500 in annual dividends, and there is a third position that is quickly closing in on that milestone.

As I do love tinkering with forecasts, I made sure to create this spreadsheet and corresponding charts dynamic such that they will automatically update as the annual dividend changes–which in turn changes the number of shares required to reach the goal, my owned shares increase or decrease, or if I change my desired annual goal.

For instance, ideally I would love for each position to generate $2,000 in dividend income and now I can quickly see how close I am to that goal.

Wrapping Up

While we often times tend to look at our dividend portfolio from the perspective of the account value, I found it fun to twist things up and look at this based on how many shares are required to produce a set annual dividend.

I did not demonstrate this above but I also included a calculation to show how much capital I would need to invest at current prices to reach the goal.

Part of what I love about dividend growth investing is analyzing the data and constantly looking at different ways to track progress towards the ultimate end goal–which for me is covering our living expenses in retirement through dividends.

Sometimes that will produce things that turn out to be useful, and other times it will simply be some time spent having fun with charts.

What do you think about this view of a dividend portfolio?

Do you weight your portfolio positions based on account value? Or by the dividend income–or maybe both?

I look forward to hearing what you think.

24 thoughts on “Fun With Charts :: Shares Required vs. Shares Owned”

    1. Glad you liked it, and I highly encourage you (and everyone) to spend time tinkering with and analyzing your data in different ways. As I mentioned, sometimes it ends up being just a fun exercise but others it will provide a new way of thinking about things.

  1. Hi DivvyDad,
    I really like the idea of weighting your holdings related to your dividend income. This would massively underweight high yield stocks, which is a good thing. On the other side it seems unpractical, for example to receive $500 from Visa, you’d need 500 shares or $67.5k. To reach the same goal with Altria would cost you $7.5k. I can’t see a scenario where I could motivate myself to put years of savings into one stock just to go equal weighted between those two related to the income.

    I try to weight my portfolio based on the cost at purchase. This allows me to let my winners run. But I’m nowhere strict and use this more as a guideline. I like to go overweight, when an opportunity arise. For example the tobacco bashing in the last months made me go overweight in tobacco stocks (MO, BTI, PM). But in the long run it should and will be more balanced.

    Thanks for the ideas and nice presentation!

    1. Thanks DR, glad you enjoyed it.

      You’re right that looking at things from this perspective can give some significant variance in the capital investment. As an example, using $500 per stock, my lowest required investment is T that would require a little over $7k in capital while DIS is the highest with about $31k in capital.

      However, when balancing only by capital value, you can end up with holdings that are disproportionately large income producers. If that stock cut the dividend or had some problems, that could have a big impact on your overall portfolio / dividend income.

      I don’t think there is any right or wrong way to do it, as we will all do things differently and have different risk tolerances, but hopefully this at least gives something to consider.

      1. You’re absolutely right. Especially considering that mostly the high yield stocks are the first to cut the dividend.

        I think you should also think about the future earning of a stock. Going equal weight with, for example MO and V would lead to a massive over weighting of Visa in the future due to the different dividend growth rates. Maybe you should add another layer to the graph which uses the the average dividend growth rates of the last 5 years and project the needed shares for the next 10 or 20 years.

        I know using past growth rates is always questionable. That’s why I’m using the lowest amount of growth rate for the last 1, 3, 5 or even 10 years as a base factor.

  2. First off. We are big, Big Bang fans. We really liked the the early episodes when they were just geeky kids.

    Anyway. I look at my portfolio from a similar perspective with a twist. I don’t ask myself how many shares of each to equalize income by holding. But I do sort my portfolio holdings from most to least annual income.

    This gives me the concentration risk to my income. I actually care more about the income than the market values. And I am far more devistated if a holding that comprises a large % of income cuts or freezes their dividend. So I keep in mind not to get overly dependent on any one stock for income as I manage the portfolio.

    1. Tom, are you me from the future? It is funny to see so many different areas where we have similarities, and I agree that those early episodes are great to go back and watch now.

      I’ve been moving more and more towards using the % income as my primary means of balancing. The dollar amount and shares required / owned are close to being two sides of the same coin, and I think ultimately the goal is to ensure that the dividend income that we all love is not overweight with only a few holdings.

      Thanks for sharing your perspective on portfolio weighting.

  3. hey dd

    Interesting way of looking at things. Theres no question for me enbridge dividends were a huge portion of my overall dividend income as well as portfolio. I cut that down.

    Generally id like to have my top stocks 5-7% of my portfolio and keep topping them up when they go under 5%. Id keep buying them if i could but it keeps me in check.

    Id love to drip cnr but that would require a tonne of capital at the moment.

    Always fun playing with charts though!
    cheers mate.

    1. I hear you, as VYM and MO are overweight for me right now in terms of % dividend income. I’ve stopped contributing to VYM on a monthly basis now, and am redirecting that monthly contribution towards other holdings. I didn’t plan on adding to my MO position but when I saw them below $43/share I had to buy a few more shares too.

      The challenge that I am having right now is that most of my underweight income positions are not presenting overly attractive prices. For example, I’ve wanted to add to my CLX position for quite some time but they have yet to come anywhere near the price I’d like to buy at again.

  4. I track and weight my portfolio based on both: market value and dividend income. In terms of dividend income, my rule is that a single position should not exceed 10% of the total income – for risk reduction sake.
    I also want to have the flexibility to overweight certain holdings (simply because I see a higher potential or due to my personal preferences). So I don’t shoot for an absolutely equal distribution – neither by market value nor dividend income).
    Nonetheless the introduced way of weighting unveils a new interesting perspective that might serve as a reference point for future investment decisions.
    Thanks for sharing, DD!

    1. Appreciate the feedback Alex, and I think you touched on something that is important. No matter how we each choose to do things, I think it is important to remember that things can, and I would argue should, be fluid. It is okay for things to be above / below our targets as long as we do so in an informed manner.

  5. I weight my holdings by value and dividend income, DivvyDad… in my spreadsheet of course, but I can’t say I’ve got any accompanying cool charts. Those charts offer a nice way to visually examine the numbers.
    It was by looking at my dividend income weighting of OHI last year that I realized it reached a level I wanted to reduce given it’s lower dividend safety rating, and I subsequently started trimming to a more comfortable level.

    1. Haha, thanks ED! I’ve definitely been playing around more with charts lately to add a little visual appeal to my spreadsheets. It has been nice as it provides a quick and easy dashboard type view to look at things versus always looking at just the numbers.

      Of all the personal finance spreadsheets I have had for 10+ years, I can tell you that most of them have not even a single chart.

      Also, that is a great point about the dividend safety. If something represents a small percentage of my income, I may be more willing to accept a higher degree of risk with a particular holding. But when it makes up a larger percentage of income, one needs to be a little more cautious and look to trim if necessary.

  6. Great chart DivvyDad – love seeing new creative ideas! There’s so many perspectives you can find with investing, which is a big part of the fun 🙂

    My focus is on performance at the moment, while the Fund is still in its early days, but i’ll be having a closer look at weightings in the near future…

    1. Most definitely, thanks Frankie! This is the part of things that I like to consider a hobby, as I enjoy spending time on things like this. It might not be necessary and it might not make any impact, but it is fun (at least for me)!

  7. I love it DivvyDad! Playing with the numbers from different perspectives definitely makes dividend investing more fun. The good thing about above progress is that the dividend raises will also contribute to reach your desired amount from each stock, so the number of shares you need should decrease 🙂
    I am often thinking about separate shares covering different area of our expenses. E.g. I like to see how much of our Car & Transportation costs dividend from XOM would cover, or how much of Cosmetics & Hygiene costs would be covered by dividend from PG. Just for fun, I am planning to create a table which would list each expenses category in our budget and link it to relevant company. Perhaps it doesn’t make much sense, especially if you have several companies from the same sector/industry, but it’s a fun thing to check 🙂
    Thanks for sharing your fun with charts!

    1. Thanks BI, and you’re definitely correct that this number will continue to change as dividends are reinvested and/or raises are announced. I believe I have it all set to automatically update when both of those occur, but I haven’t tried to build it into the future forecast of shares required.

      I do love the way that you break down your dividends as it relates to your monthly expenses. That is on my “to do” list for my own portfolio too, as it really adds a fun perspective that company X is now paying your monthly bill. Hmm, maybe I should look to buy some JPM as they hold our mortgage now, and I could look at that as an alternative to paying off our mortgage early. 🙂

  8. Interestingly, the approach of measuring your allocation in terms of dividend income is one that I also place the most weight in currently. Although I’m at least a decade from primarily relying on my portfolio for income, I can be reasonably sure my income will chug along with this method. The method cost me some massive capital gains from the sale of nearly half my OHI shares at a near break even cost early last year, but I did feel more safe in my dividend income so it was a trade off that I’ve since accepted. Plus the company I allocated proceeds to has enjoyed some nice capital appreciation too (SO). The way I see it is while capital appreciation does occur over time, it is too variable from month to month to rely on, which is a stark contrast to reliability of dividend income.

    1. You’re right Kody–there are some groups that I am in where people don’t care for dividends at all and believe capital appreciation is the way to go. However, once you’re in retirement, one of the critical factors is a consistent and reliable income and that is where I think dividend investing shines.

      While there are certainly risks and chances that dividend income can decline, I would say it is much more the exception and usually comes with some warning signs.

      Nice to see that the shift from OHI to SO has been working out. That ability to sleep well at night cannot be underestimated.

  9. That is a very interesting approach!

    I weight my holdings mostly by value, so I don’t overweight a single stock too much.
    I don’t think I have ever even tried to weight my portfolio by the dividend income, but I will definitely try it!

    1. Thanks my fellow DD, glad you liked it. Hopefully you give it a spin and see if anything interesting comes out of it for you and your portfolio!

  10. I used weighting, the percentage of overall dividend income in my google sheet because the goal is to produce consistent cash flow from dividend, not market value. I calculated how many shares needed, too. Then I round to nearest hundred because selling covered call options requiring multiples of 100 shares is a way to generate additional cash flow.

    I like graphs and calculations. Keep it up. cheers.

    1. Thanks for the feedback, and welcome to the site DSFI.

      I like the way you have rounded to the nearest hundred to account for covered calls; I am planning to begin using options but haven’t taken the plunge yet. I am planning to use naked puts for positions I am interested in buying and covered calls for positions that I own, but am still educating myself to try and minimize mistakes.

  11. Interesting perspective DD. I for one, love it. I haven’t thought about weighing my portfolio based on dividend income, but I did think about weighing my portfolio based on the number of shares I own for each stock.

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