Tuesday, December 28, 2010

* 2011 Investing Goals

My goals were originally defined in this December 1, 2007 Investing Goals post and last updated in my 2010 Investing Goals. Unlike last year when I will fell short of my goal, I will greatly exceed my 2010 goal of $9,500 in annualized dividend income. Looking at my long-rang goals, I am still on track to reach my 2017 goal of $30,000 and based on my latest model, I could reach it in 2014. The 2027 goal of $110,000 is not as clear. Given the increased prices and lower yields of new investments, my model is currently indicating this could be difficult to make.

The tough financial environment we experienced over the last 2 years has helped me focus on higher quality stocks and in turn, my income portfolio is better equipped to handle the inevitable downturn. As valuations increased, current yields declined prompting some income investors to chase higher-yielding and higher-risk stocks. My income portfolio's 2010 risk rating will end very close to where it was in 2009.

Looking to 2011, I don't see it much differently than 2010, with the possible exception of a correction sometime during the year. I always welcome a correction as a buying opportunity. 2010 had fewer dividend cuts, I anticipate a similar level in 2011. On the plus side, I suspect 2011 will will see fewer companies failing to raise their dividends (dividend freezes). With that as a backdrop here are my updated goals going into 2011:

Description Dividend
on Cost
2027 Goal 110,000 10.00%
2017 Goal 30,000 5.80%
2011 Goal 15,500 4.70%

I left the income goals for 2027 and 2017 goals unchanged. However, it is very apparent that I will not make the YOC targets for 2027 and 2017. I lowered 2027's YOC from 20% to 10% and lowered 2017's to 5.8%. I am setting my 2011 annualized dividend income goal at $15,500. To achieve this goal, I anticipate more robust dividend growth than we have seen in the last two years. The 2011 yield on cost of 4.70% assumes significantly lower dividend declines from holding less income ETFs with volatile dividends.

I am confident that I will finish 2011 with higher annualized dividend income than where 2010 ended. In addition, I feel good that my string of sequential months of higher annualized dividend income will continue through 2011.

If it were easy, everyone would do it and success wouldn't be nearly as satisfying. Here's to an exciting 2011!

(Photo: sanja gjenero)