The S&P 500
dividend nominal growth rate has been remarkably stable.
Not exact matches
If I assume a
dividend growth rate of 6 percent (about the long - run average *), the current S&P 500
dividend yield of 2.1 percent (from multpl.com), a terminal S&P 500
dividend yield of 4 percent (Hussman says that the
dividend yield on stocks has historically averaged about 4 percent), the expected
nominal return over ten years is 2.4 percent annually.
I should note that in each of these models, we're assuming a long - term
growth rate for cyclically - adjusted earnings, revenues,
dividends,
nominal GDP and so forth of about 6.3 % annually.
From the equation, we can see that the annualized
dividend growth rate is 6.75 % per year (
nominal).
I teamed it up with DVY assuming a current yield of 3.97 % and a
dividend growth rate of 5.5 %
nominal, the same as for the S&P 500 index.
The formula for the real income of an investment at year N is: Inflation adjusted
dividend income = (initial
dividend amount) * -LCB-[1 + (
nominal dividend growth rate)-RSB- ^ N -RCB- / -LCB-[1 + (inflation
rate)-RSB- ^ N -RCB- Typically, you would use a
nominal dividend growth rate of 5.5 % per year in the absence of other information and 3 % per year inflation.
If so, the formula becomes: Inflation adjusted
dividend income = (initial
dividend amount) * (1.055 ^ N) / (1.03 ^ N) With preferred stock and / or bond income, use a
nominal dividend growth rate of 0 %.
I used a DVY
dividend growth rate of 5.5 %
nominal, same as for the S&P 500, and 0 % for PFF.
I collected additional data with initial
dividend yields of 3 %, 4 % and 5 % and
nominal dividend growth rates of 6 %, 8 % and 10 % per year.
Keep in mind that these are
growth rates of the
NOMINAL dividend amount.
The Investment Return equals (0.6 * the initial
dividend yield of Stock A + 0.4 * [the 2 % real TIPS interest
rate + the 3.0 % inflation
rate]-RRB- + (0.6 * the
nominal growth rate of the Stock A
dividends + 0.4 * the
growth rate of TIPS (which equals the 3 % inflation
rate)-- the 3.0 % inflation
rate.
It has had a remarkably stable
NOMINAL dividend growth rate of 5 % per year since the 1950s (actually, since the 1940s).
I treat each investment as an initial
dividend yield with a fixed (
nominal)
growth rate.
If the initial
dividend yield is 4 % and the
nominal dividend growth rate is 5 % per year AND if the Stock A allocation is 80 % and the TIPS allocation is 20 %, the Continuing Withdrawal Rate is 4.9
rate is 5 % per year AND if the Stock A allocation is 80 % and the TIPS allocation is 20 %, the Continuing Withdrawal
Rate is 4.9
Rate is 4.95 %.
It retains the S&P 500's 5 % per year
nominal dividend growth rate.
As a reference, the S&P 500
dividend growth rate is 5 % per year (annualized,
nominal).
It currently has a
dividend yield just under 2 % and, for the last half century, it has had an amazingly steady 5 %
nominal dividend growth rate.
It should be straightforward to match the 5 % per year
nominal dividend growth rate of the S&P 500.
Since 1950 (actually, since the 1940s), S&P 500
dividends have had a remarkably steady
nominal growth rate of 5 % per year.
For planning purposes, assume that the sum of the initial
dividend yield and the annual
NOMINAL dividend growth rate equals a constant.
I describe the two investments by their initial
dividend yields,
dividend growth rates (
nominal) and allocations.
The scale factors are -LSB-(1 +
nominal dividend growth rate) / (1 + inflation)-RSB- ^ N.
I set its
dividend growth rate to 5.0 %
nominal, which is low but matches that of the S&P 500.
If I assume a
dividend growth rate of 6 percent (about the long - run average *), the current S&P 500
dividend yield of 2.1 percent (from multpl.com), a terminal S&P 500
dividend yield of 4 percent (Hussman says that the
dividend yield on stocks has historically averaged about 4 percent), the expected
nominal return over ten years is 2.4 percent annually.
Your income stream will come within about 1 % of the initial
dividend yield plus the annualized,
nominal growth rate of the
dividend minus the inflation
rate.
The Investment Return = Initial
Dividend Yield +
Dividend Growth Rate (annualized,
nominal)-- Inflation = 4 % +5 % -3 % = 6 %.
Notice that Stock A has an 8 % per year (
nominal)
dividend growth rate.
Stock A has a 4 %
dividend yield and a 5.0 % (
nominal)
dividend growth rate.
I took the investments from Taken At Face Value, Condition A. Investment A has a 3.5 % initial yield and an 8 % per year
nominal dividend growth rate.
Investment B has a 6.1 % initial yield and a 2 % per year
nominal dividend growth rate.
Most of the time, the sum of the
dividend yield and the
dividend growth rate of the S&P 500 has been 9 % to 10 % (
nominal).
This time I took the investments from Taken At Face Value, Condition A. Investment A has a 3.5 % initial yield and an 8 % per year
nominal dividend growth rate.
(
Nominal)
dividend growth rates of 5.0 % to 5.5 % are sufficient to support younger retirees.
Since inflation is typically close to 3.0 % (long - term), (
nominal)
dividend growth rates of 5.0 % to 5.5 % are sufficient to support younger retirees.
Dividend Growth to the Rescue Since inflation averages around 3.0 % per year, the required nominal dividend growth rates are 4.0 % an
Dividend Growth to the Rescue Since inflation averages around 3.0 % per year, the required nominal dividend growth rates are 4.0 % and
Growth to the Rescue Since inflation averages around 3.0 % per year, the required
nominal dividend growth rates are 4.0 % an
dividend growth rates are 4.0 % and
growth rates are 4.0 % and 5.5 %.
I allocated $ 50000 to
dividend stocks with an initial
dividend yield of 3.5 % and a
nominal dividend growth rate of 5 % per year.
Since the
nominal dividend growth rate is 5.5 % and the long term inflation
rate is around 3.5 %, (1 + real
rate of
growth) = (1.055) / (1.035) = 1.0193 or the real
rate of
growth = 1.93 %.
This is because the
growth rate in the
nominal dividend amount is usually steady, but inflation jumps around considerably.
Using the low end of his (
nominal)
dividend growth rate requirements, such a blend produces a continuing withdrawal
rate of 5.5 %.