Here is a follow up on the recent post “How Many Shares To Buy To Get One Share in Dividends?”
In that post, the concept was explored of having a goal when dividend investing of buying enough shares of stock to allow the first quarter’s dividend buy at least one addition share when using dividend reinvestment.
In that post, the examples of a 2% and 5% yield were discussed. In this post, a more complete example of other percentage yields are given.
In the following table, given the dividend yield shown will need the number of shares listed to buy at least one full share if dividend reinvestment is used.
| yield | number of shares required to get one additional share |
| 1% | 400 |
| 2% | 200 |
| 3% | 133.34 |
| 4% | 100 |
| 5% | 80 |
| 6% | 66.67 |
As mentioned in the initial post, the number of shares required is irrespective of the price.
We have limited the yield to a maximum of 6% because even 6% is often considered as edging into dangerous territory. A short spike in dividend yield is not particularly a red flag, but keep in mind that a consistent high divided yield often is. It often signals a share price drop or other anomaly. Falling into a dividend trap is not uncommon for investors chasing high yields.
What We See
It is tempting to do some armchair analysis about the table above. For example, we could think that a stock yielding 5% allows the stockholder to accumulate five times as many shares per quarter than a stock paying 1%, given dividend reinvestment.
Goals
The ultimate goal for dividend investors is to cover one’s expenses from one’s dividends. How to survive the emotional ups and downs on the way towards that ultimate goal?
Certainly there are other markers that could be sought. Like covering certain expenses.
The description of the goals of one share per quarter is an arbitrary goal. There is no intrinsic reason this goal is any better than any other. It was only a emotional goal meant to provide a comfort for a growing portfolio. But I see it is affective in the psychological sense.
Seeing shares being added quarter after quarter is invigorating and affirming. Certainly more comforting than seeing a tenth of a share (or less) added at a time.
Resources
It goes without saying that there are many considerations that must be taken into account when embarking on a dividend investment strategy. Or any investment strategy.
One’s risk tolerance, the state one’s finances, the state of the company is question, the general state of the economy, and so on…, all add up to be weighed when starting investing.
Needless to Say
Arbitrary goals are simple and easy. We addressed one share per quarter, but there is no reason that one cannot make a goal of multiple shares per quarter, assuming on has the funds and the inclination. For example, to be able to buy two shares per quarter for a stock with a 1% yield, the initial investment is 800 shares.
And of course there is no guarantee that things won’t change. Stock prices could drop, and your dividends may buy more shares. Stock prices could spike and you dividends could buy less shares. The future is unknown. But we persevere because even in the unknown, we seek financial security and peace of mind.
What goals do you set for your dividend investing? Let me know here.
The painting Corythaix Leucolopha was painted in 1871 by Thomas Waterman Wood. The bird is also known as a White-crested Turaco, or Tauraco leucolophus.
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