Tracking Annual Forward Dividend Income

Imagine the odd looks and blank stares that I receive when answering people about my hobbies with the following one-word reply…

Spreadsheets.

I’ll admit that I am a bit of a spreadsheet nut, and despite great tools such as Mint.com and Personal Capital, I continue to track our family finances with spreadsheets. We have spreadsheets that track our net worth, budget, and a handful of other relevant information dating back to at least 2003.

Tracking the DGI Portfolio

Given this obsession love, it was only natural that I would look to track my dividend portfolio with a spreadsheet.

Being a fan of the mantra “work smarter, not harder”, I usually try not to reinvent the wheel when it comes to my spreadsheets. Therefore I leveraged the great work from the team over at Two Investing when they shared their dividend portfolio spreadsheet.

With a solid foundation, I will then usually tweak the spreadsheet to fit my needs–which I have done slightly with my DGI spreadsheet.

All in all, I’ve been pretty happy with my spreadsheet.

However, there has been one gap that I had identified not only in my spreadsheet but also in how I was monitoring the progress of my DGI portfolio overall.

Gap in Tracking

As part of my monthly dividend income reports, I have been mentioning the amount of annual forward dividend income (AFDI) that has been added by new stock purchases–which for me is one of the exciting parts about those monthly reports.

However, I wasn’t recording or tracking that anywhere in my spreadsheet.

Nor was I tracking the annual forward dividend income generated by my reinvested dividends.

Likewise for dividend raises.

In all honesty, tracking dividend raises was a glaring gap in my process as it seemed I was not yet in-tune with the best process to monitor those raises before they arrive in the form of an increased dividend payment.

Work Smarter, Not Harder

When reading and commenting on blog posts across the DGI community, one of the things that I always keep an eye on is how other people are tracking and monitoring their progress.

Through that process, I was drawn to how Engineering Dividends is tracking his AFDI when he shared his recent dividend income report.

Check out his post and then scroll down to the comments.

You will notice that I shared the fact that tracking my dividend raises was a gap in my process, and something that I needed to improve upon. ED shared his recommendation on the importance of tracking where the AFDI is being generated. Being new to this space, I know that there is a lot to learn and therefore I definitely heeded his advice.

Seeing as how ED had already implemented a nice process for his portfolio, I reached out to him and asked a few questions. We exchanged a couple of emails and I asked if he was okay with me mimicking his process.

New and Improved Tracking

The spreadsheet that I am using has a fair amount of automation built-in so all I typically have to do is enter in transactions, such as a new buy or dividend, and everything else is updated accordingly.

Step 1.

The first step was to convert my dividend payouts into the equivalent forward dividend income. The tab that summarizes my dividend payouts is automated but it records the full dollar amount paid out. I decided to copy that tab and adjust the formula to calculate the forward dividend income generated by that dividend payout.

This new tab looks like this:

As an example, the $1.72 in forward dividend income from Cracker Barrel was from the $50.00 dividend payment in August.

Step 2.

The next step was to improve (or maybe I should say start) tracking the dividend raises.

Tracking the dividend raises is a more manual process, as it relies on monitoring the news / notifications on each holding to see when they have announced a dividend raise. I am currently doing that via SeekingAlpha, and have also leveraged the dividend history available on the Nasdaq.com website.

Here you will see that I have utilized the same format that ED has used, as why fix something that isn’t broken.

You’ll notice an extra section of information off to the right in the screen shot above.

I’ve added that to record what month each holding has typically announced their dividend raises, and then I have two columns that show the annual and periodic dividend payments for the month of July.

As my spreadsheet automatically updates the dividend forecast when there is an increase, I am going to manually do a cross-check every month just to confirm that I have not missed any updates that were announced. This probably isn’t necessary but will be an additional sanity check just to be sure.

Step 3.

The last step is to track the annual forward dividend income from the new capital invested in the portfolio.

As I am already calculating this as part of my monthly recap, I am going to simply add that value into my cumulative view of the AFDI on an annual basis.

Below is what this looks like–which is just like ED’s report with one addition.

The top section of the table is formatted just like ED has done. On a monthly basis it records the amount of forward dividend income received from reinvested dividends, dividend raises, and investment of capital.

The addition that I made is in the bottom section of the table.

To truly appreciate the value of dividend growth investing it helps to see how much new capital would have to be invested to obtain the same amount of forward dividend income received from the reinvested dividends and dividend raises.

With a quick calculation that references the current average dividend yield of my entire portfolio, I am calculating that on a monthly basis.

As an example, for the month of July, I received an additional $3.78 in forward dividend income from the dividends that were reinvested and $4.33 from dividend raises. That equates to requiring a capital investment of $294.92 combined.

That might not seem like a lot, but that is nearly $300 in value that I received for doing absolutely nothing.

Talk about passive income!

The best part is that as I continue feeding the dividend machine, this number will continue to grow. Over time, the goal is to see that level of equivalent capital exceed the amount of capital I am investing.

At that point my money is working harder for me than vice-versa.

Summary

While I had been pretty happy with my portfolio spreadsheet before making these changes, now I feel as though I have addressed the one gap that I knew was there.

With the additions to track the annual forward dividend income generated from reinvested dividends, dividend raises, and new capital I will be able to monitor this over time and include this in future monthly dividend income reports as another metric.

I’d like to thank Engineering Dividends again for the time to help answer my questions and willingness to share his approach.

That level of transparency and camaraderie is something that is truly special about the DGI community!

What do you think of these additions to my tracking?

Are you tracking your annual forward dividend income from each source?