Dividend Investing And 'Payback'

Looking at a metric of “payback” based on dividends received is a very interesting concept to me. If we look at a criteria of a 1-year, 3-, or 5-year dividend growth rate, we would obviously have better results than my random 3% assignment. The payback on MO, based on a projected 9.7% dividend growth rate (one year) would take that payback on the initial investment to a little over 10 years. At a dividend growth rate of 18.3% (3 years), MO would pay back the initial investment in a little over 8 years.

At the same time, selecting dividend growth stocks that also offer the opportunity for capital gains would accelerate that payback period. Selling a partial position would allow the investor to actually be working with “house money” and not their own. As a dividend growth investor, it pays to be active in the management of your portfolio and to be aware of situations when there comes a time to take money off the table.

Source: Seeking Alpha

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