I'm using FAST graphs for most of my analysis, and in that format I use 10 years with dividends reinvested for my research. I'm not sure why, but that gives an 8 year DGR, which is right in my retirement sweet spot.
This works well with older companies, and was VERY illuminating. I was able to quickly eliminate some positions based on my desire for approximately 10% YOC after 8 years have elapsed. It was amazing to see how DGRs combined with initial yield can make a huge difference. For instance, AFL didn't even come close, and so I eliminated that position with a very small gain. But UNP, which has a very low dividend yield, but a huge DGR, made the cut.
I was blown away by the YOC on some of the BDCs and REITs after 8 years. For instance, O has an 8 year DGR of 6%, but when you start at 5% Yield it's easy to get to 10% YOC after just a few years. And when you start looking at BDCs it's even more positive.
For equities that do not have long histories, it's a bit more problematic. But in some cases, you can get an idea of the DGR in other ways. For instance, I have LNCO in my portfolio. It basically has zero history. But, if you look at the 'parent' MLP (LINE), the 8 year DGR is 8%. Combine that with the current yield on LNCO - 9% - and it certainly appears that my goal of 10% YOC is achievable.
It's been really eye opening. A year ago I wouldn't have touched these equities. Now, I'm looking at them in an entirely different light.
This works well with older companies, and was VERY illuminating. I was able to quickly eliminate some positions based on my desire for approximately 10% YOC after 8 years have elapsed. It was amazing to see how DGRs combined with initial yield can make a huge difference. For instance, AFL didn't even come close, and so I eliminated that position with a very small gain. But UNP, which has a very low dividend yield, but a huge DGR, made the cut.
I was blown away by the YOC on some of the BDCs and REITs after 8 years. For instance, O has an 8 year DGR of 6%, but when you start at 5% Yield it's easy to get to 10% YOC after just a few years. And when you start looking at BDCs it's even more positive.
For equities that do not have long histories, it's a bit more problematic. But in some cases, you can get an idea of the DGR in other ways. For instance, I have LNCO in my portfolio. It basically has zero history. But, if you look at the 'parent' MLP (LINE), the 8 year DGR is 8%. Combine that with the current yield on LNCO - 9% - and it certainly appears that my goal of 10% YOC is achievable.
It's been really eye opening. A year ago I wouldn't have touched these equities. Now, I'm looking at them in an entirely different light.