Getting ALL MY MONEY Back (From Dividend Stocks)

When I invest in dividend stocks, I'm now thinking about how many years it will take to get all of my money invested back. This frame of mind helps me plan for the future, as a dividend investor in his 40s. I'm excited to share a few models and an analogy from the real estate development world.
#dividend #stock #investing

Upon editing my video, I noticed a typo on my whiteboard. The Easy Formula should read: 100 / Dividend Yield = Number of Years To Return Capital.

Timestamps:
0:00 INTRODUCTION
0:22 As a younger investor, I was all about dividend growth stocks. I did not have an eye on getting my capital back.
0:55 I'm thinking differently as an older investor. I don't have as many decades for yield-on-cost to work.
1:30 KEY: I don't want to invest in stocks that have such a low starting yield that I won't get back my capital during my lifetime.
2:03 I'm in this for me.
2:27 HELPFUL FORMULA: 100 / Dividend Yield = Number of Years To Return Capital
2:54 It's a conservative, back-of-envelope analysis assuming no dividend growth and assuming no reinvestment.
3:54 SEGMENT 1: COMMERCIAL REAL ESTATE DEVELOPMENT ANALOGY
4:20 Real Estate Lifecycle Illustration
4:26 Capital is raised and tied up for years.
5:30 Years later, when the construction loan is refinanced to a permanent loan, capital is paid back. Investors get their capital returned! (And, sometimes even more!) This is an interesting analogy for dividend investors to think about.
8:08 Dividend investing is a safer route of capital allocation vs. real estate development, in my very personal opinion.
8:40 Dividend investing doesn't have a refinance event, but capital comes back a little each year/quarter with the dividend distributions.
9:07 SEGMENT 2: REALTY INCOME (O) DIVIDEND STOCK ANALYSIS
9:16 Check out the pinned comment for a link to my Patreon.
9:38 5.68% starting dividend distribution yield
9:46 Price / AFFO is 13.67, a reasonable valuation in my opinion.
10:00 Dividend growth of 3.03% is sustainable, in my opinion.
10:34 QUESTION: Am I using all of my dividends to pay bills?
11:00 REALTY INCOME (O): Years to get back my investment (it's about 14-15 years factoring in dividend growth)
12:53 NOTE: If I were reinvesting dividends, my yield-on-cost would go up even more.
13:40 SEGMENT 3: STARBUCKS (SBUX) DIVIDEND STOCK ANALYSIS
13:50 2.23% starting dividend yield
13:56 9.6% dividend CAGR will probably slow to about 8%.
14:17 69% payout ratio
14:24 With higher growth dividend stocks, valuations tend to be higher (as we are seeing here with SBUX)
15:00 It's looking like 19-20 years to get my capital back in the form of dividends.
15:09 We can see after 30 years, yield-on-cost gets to over 20%, and it beats O from that perspective.
16:23 SEGMENT 4: ANNUITY MODEL COMPARISON (Dividend Stocks Vs. Annuity Mindset)
16:26 What's an annuity?
17:39 Would I be better off taking net new capital, putting it in a high-yield savings, predicting how many years I have left, and treating it like a self-managed annuity?
18:36 It's a fun thought question I asked myself. It's fun to think about these scenarios.
20:05 Please share your thoughts in the comments below!
20:17 DISCLOSURE AND DISCLAIMER

DISCLOSURE: I am long Realty Income (O) and Starbucks (SBUX). I own these stocks in my personal dividend stock portfolio.

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Because the information herein is based on my personal opinion and experience, it should not be considered professional financial investment advice or tax advice. The ideas and strategies that I provide should never be used without first assessing your own personal/financial situation, or without consulting a financial and/or tax professional. My thoughts and opinions may also change from time to time as I acquire more knowledge. These are, as discussed above, solely my thoughts and opinions. I reserve the right to delete any comments for any reason (abusive in nature, contain profanity, etc.). Your continued reading/use of my YouTube Channel, blog, email newsletters, whitepapers, Excel files, and other materials constitutes your agreement with and acceptance of this disclaimer.

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By: ppcian
Title: Getting ALL MY MONEY Back (From Dividend Stocks)
Sourced From: www.youtube.com/watch?v=f-Juu1i78Yo



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