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Monday, December 18, 2017

Goals for 2018

Welcome to my goals post for 2018!

In this article, I'll do a quick review of my 2017 goals and present my goals for 2018.

I believe in setting stretching yet achievable goals. It is not useful to entertain goals that are impossible to achieve. On the other hand, goals that are easily achievable will not require special effort and probably won't give you a special sense of achievement.

Stretching goals demand extra effort and focus. They require commitment, patience, and constant monitoring. Sometimes, when progress is not sufficient, they require a course correction.

Review of 2017 Goals

Before presenting my 2018 goals, let's review my 2017 goals.

My fifth year with DivGro has been interesting. It is the first full year I've traded options to supplement dividend income and I'm very happy with the progress I've made!

In November, I achieved my goal of securing $8,400 in options income in 2017. Secured options income is from options contracts that have expired or are otherwise terminated.

The cool thing about selling options is that I can deploy the options income as soon as the money hits my account. It is somewhat like a loan with my portfolio as collateral. Since I started trading options in June 2016, I've collected options income totaling $20,263 ($10,976 of which is secured) — and I've used most of that money to buy more dividend paying stocks!

I increased projected annual dividend income (PADI) from $12,376 to $15,858 (through November), an increase of about 28%. My goal for 2017 was to increase PADI to $14,400, so I shattered that goal quite handily!

Dividend income in 2017 should total about $14,700, compared to a total of $10,700 collected in 2016. This represents an increase of about 37%! Again, I easily achieved my 2017 goal of collecting $12,960 in dividend income.

There are two 2017 goals that I won't achieve, which I'll discuss in my annual review. While disappointing, I'm inspired to try harder next year.

Assumptions and Commitments

Before presenting my 2018 goals, let me state some assumptions and commitments.
  • Recurring capital deposits of $1,000 per month ($12,000 for 2018)
I decided not to change my monthly capital deposit. When possible, I'll make bonus deposits to boost DivGro's capital. However, the likelihood of bonus deposits in 2018 is somewhat small, as I have other financial obligations in 2018.
  • Reinvest dividends, on average at least $1,325 per month (at least $15,900 in 2018)
As mentioned, DivGro's PADI now stands at $15,858. Except for dividend increases, I don't expect PADI to change much in December, as I'm not planning to do any buys or sells this month. Assuming a PADI of $15,900 at the beginning of 2018, I can expect to reinvest a minimum of $1,325 (on average) every month. Of course, as the year progresses, PADI will increase and so will the amount available to reinvest.
  • Deposit premium article income from Seeking Alpha (goal is $6,000 for 2018)
I'm on track to earn more than $5,000 in premium article income from Seeking Alpha in 2017. Unfortunately, Seeking Alpha will be changing its compensation scheme in 2018 and it is difficult to predict how this change will impact earnings. Nevertheless, I'm aiming for $6,000 based on available information and will adjust my contribution content and frequency as needed. 
  • Retain and invest options income (goal is $12,000 for 2018)
I achieved my goal of securing $8,400 in options income in 2017. I see options trading as a significant growth area for DivGro in 2018. I'm planning to transfer one of my FolioInvesting accounts to Interactive Brokers to enhance my ability to trade options. My goal of $12,000 represents an increase of 43%, which will be quite a stretch! I'm looking forward to the challenge!
  • Assume initial yield on cost (YoC) averaging 3% 
Although DivGro's initial YoC is about 3.9%, I want to focus on improving DivGro's risk profile in 2018. This implies that I'll be looking to invest in safer dividend growth stocks and quite possibly ones with lower yields. So I'm more comfortable to assume an initial YoC of 3% for next year. 
  • Assume annual dividend growth rate of 6%
In my latest quarterly report, dividend increases averaged 6.66%. Last year, the average dividend increase for my portfolio was 8.15%. Neither of these increases is based on a weighted average calculation. I'll do a weighted average calculation for my next annual review. I suspect that such a calculation would indicate a smaller effective dividend growth rate. For the time being, I'll use 6%.

2018 Goals

To determine achievable yet stretching goals, let's first look at what I can expect to invest in 2018.

Fresh capital will include $12,000 from recurring deposits, as well as about $6,000 from Seeking Alpha income and $12,000 from options income, for a total of $30,000.

Dividend income will start at about $1,350 per month and progressively increase as I buy stocks. Taking just the minimum, I'll be reinvesting dividends totaling about $16,000.

Assuming I invest all fresh capital and all dividend income (but not currently available cash), new investments in 2018 will total about $46,000. An initial YoC of 3% will add about $1,380 in additional dividends.

To make this a stretching goal, I'm rounding $1,380 up to $1,500.

1. Increase projected annual dividend income to $18,500

DivGro's PADI of about $16,000 should grow to about $17,000 due to dividend increases (assuming a dividend growth rate of 6%). Adding additional dividend income of $1,500 from new investments, DivGro's PADI should grow to about $18,500 in 2018.

This amount represents an increase of 28% compared with 2017's goal of $14,400. However, I'm starting at about $16,000 so the increase will be more modest at 16%. 

2. Earn $18,000 in dividend income.

I easily topped this year's dividend income goal of $12,960. For 2018, I should earn at least $16,000 in dividend income. Accounting for dividend growth ($1,000) and additional dividends ($1,500) is tricky because dividend income from new investments will have a lag of about one quarter.

To account for the lag, I'm adding only 75% of the $2,500 to the baseline, or $1,875. Rounding up to $2,000 sets a dividend income goal of $18,000, an increase of 39% compared with this year's goal. Again, since I handily beat my 2017 dividend income goal with an estimated $14,700 received, the actual increase will be more modest at about 22%.

3. Secure $12,000 in options income.

As mentioned earlier, I see options trading as a significant growth area for DivGro. Having achieved my goal of earning $8,400 in options income in 2017, I'm sticking my neck out with a bold increase of about 43% to $12,000.

Transferring one of my FolioInvesting accounts to Interactive Brokers will enhance my ability to trade options. Not only will this transfer allow me to sell additional covered calls, it also will provide more collateral for selling secured puts. I'm looking forward to the challenge!

4. Write 72 premium articles for Seeking Alpha.

Through November 2017, I've written 71 premium articles for Seeking Alpha, which is well above my goal of 64 premium articles. For 2018, I'm increasing my goal to 72 premium articles. While this is a modest increase, I'm also planning to launch a subscription service on Seeking Alpha's platform in 2018, so I don't want to overreach with this goal.

5. Launch a subscription service at Seeking Alpha.

Earlier this year I received an invitation to join Seeking Alpha's Marketplace as a premium author.
Marketplace is a monetized platform to host value-added investment services. The content of the service would be up to me, as long as I can attract subscribers. The format could be a regular newsletter that tracks model portfolios, real-time chats with subscribers, or extensive financial models, spreadsheets, stock analyses, etc.

At the time, I declined the invitation because of work obligations. But I'm hoping to get some time over the summer months in 2018 to launch such a service. The opportunity seems compelling!

Thanks for reading! Are you setting achievable yet stretching goals for 2018? Feel free to share your goals and to comment on mine! All the best for 2018 and thanks for your support!

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