I saw a post by a blogger named Write2Reality who wrote about calculating/projecting his forward 12 month dividends that got me thinking whether this is useful data for most.  Despite not agreeing with W2R I would recommend checking out his blog; an engaging blogger with great content (a rarity today).

Is Calculating a Projected Forward 12 Month Dividend Useful?

Unlike when I took a look at history of my dividend income, my gut reaction is that projecting a portfolio’s forward dividend is not useful for those still in the accumulation phase, as opposed to those actually living off their dividends.  Why? If you are still building your dividend portfolio then there is no real good way to use the data.

The number clearly won’t include your future additions and dividend reinvestments, as such, the moment you hit enter on the sum cell it is already wrong.  While it may not be useful but if it isn’t detrimental who cares, right?  Well if you are a less than disciplined investor it may even cause you to make terrible decisions to build forward yield.  If you are continuously updating the number, you may go for yield when that wouldn’t help.  It is similar to a CEO caring about today’s numbers at the expense of long term growth.

One may argue by knowing what you are expected to have in terms of income it is a good way to determine whether you are utilizing capital in the most efficient way possible.  For example if my forward 12 month dividend is calculated at $200 a month, maybe I could re-characterize the value into another class.  I believe that we are back to caring about today’s numbers at the expense of yield on cost in the future.

My bias is obviously based on where I currently am in my investing life.  If I were to live off of or need in anyway the dividends then my view would change pretty quickly.


Do you calculate your forward 12 month dividends? What am I missing?