Sat. Dec. 20, 2008

2009 Investing Goals *

My goals were originally defined in this December 1, 2007 Investing Goals post. Short of a cataclysmic melt-down, I should greatly exceed by 2008 goals. In addition, I am well on track to reach my 2017 and 2027 goals, as such, I will leave them unchanged. Now, what to do with my 2009 goal?

The financial environment we are operating in certainly adds complexity to setting a reasonable 2009 investment goal. October and November brought a rash of dividend cuts, and I don’t think the carnage is over yet. As I will explore in a later article, I have compensated by taking on additional risk, leaving little additional room to withstand significant dividend cuts in the future. I am hoping to get through December with only marginal dividend cuts. However, the majority of the ETFs and CEFs that I hold will not declare until next week. I anticipate that they will continue to trend down, as they have over the last several quarters.

Looking to 2009, I anticipate it will be as bad and probably worse than 2008. It will be a challenge to prevail in this environment. In the upcoming year, I anticipate high volatility in the market, with a general trend downward. On the positive side, this will provide continued opportunities to pick up world class stocks at bargain basement prices. It will also expose the world class pretenders through dividend cuts and significant share price declines. With that as a backdrop here are my revised goals going into 2009:

Description Dividend
on Cost
2027 Goal 110,000 20.00%
2017 Goal 30,000 10.00%
2009 Goal 8,000 5.00%

As noted above, the 2027 and 2017 goals are unchanged. In setting the 2009 annualized dividend income at $8,000, I considered what happened in 2008, with special attention to the last 4 months. To achieve the $8,000 of annualized dividend income, the overall rate of growth will be less than what was enjoyed in 2008. The 2009 yield on cost of 5.00% will likely be lower than where I ended 2008. Both of these will be influenced by my need to reduce the risk in my portfolio during the first half of the year and/or suffer significant dividend cuts.

I am confident that I will finish the year with higher annualized dividend income than where 2008 ended. Unfortunately, I am not confident that my string of sequential months of higher annualized dividend income will survive through 2009.

If it were easy, everyone would do it and success wouldn’t be nearly as satisfying. Here’s to an exciting 2009!

4 Responses to “2009 Investing Goals *”

  1. Dividend Tree says:

    Congratulations on surpassing your 2008 goals. Good luck for 2009.

  2. Baci says:

    In order to have 110K in annual dividend income–how big to project your portfolio will need to be? I assume that in order to have made $5636 in dividends in 2008–you are working with about 100K presently?

  3. Market value will change and that is less relevant than the income generated, so I tend to focus on cost and yield on cost (YOC). My YOC is currently 4.88% thus the $5,934 is based on a portfolio with a cost basis of $121,598. The calculation is not linear since dividends, thus yield on cost, should grow each year. Unfortunately, this has not been the case the last couple of years due to many dividend cuts and freezes. My current model says that in 2027, my dividend income will be $78,952 on a portfolio with a cost of $859,427 (YOC of 9.19%). I am not ready to concede my $110k goal yet, but I will have to wait on the market to stabilize some so that I can develop better projections. My $30,000 in 2017 is still on target.

    Best Wishes.

  4. Baci says:

    Thank you for your response–I love your blog–super informative–really appreciate the time you put into it–I read it every day.