One of the stats I like to keep track of with my FI Portfolio is the payback period. Essentially the payback period is how long it would take an investment to return the original cost of the investment. In other words if you bought a business for $100k and it returned $20k in profits directly to you each year that would be a $100k / $20k = 5 year payback period. Now of course this isn't taking inflation and the time value of money into account but it's a good general overview.
I wanted to take a look at how some of my positions have done so far. The following table shows the invested capital, total dividends received and the payback percentage for each open position in my portfolio.
My leader so far in payback has been AT&T (T) of course that's not surprising given that it has the highest yield-on-cost for any position in my portfolio and was also one of the first stocks I purchased. I was originally reinvesting the dividends but have since turned the DRIP off and elected to reinvest them in companies with better growth prospects. I had originally purchased the shares in November of 2011 and have already received almost 10% of my capital back in the form of dividends.
My lowest is that string of four holdings at the bottom of the list. Nothing to worry about though, I recently initiated positions in them and haven't received any dividends yet.
I don't consider the payback period for my positions in any of my analysis because it's hard to predict given the different growth rates. Plus the timing of purchases and how long you've held a position can really affect the results. Just because you've had a 50% or 100% or higher payback doesn't mean it was a good investment. A good investment is going to provide dividends that are safe and consistently grow year in and year out based on the growth of the company. I still find it helpful to keep me on task by seeing just how much of my invested capital has been paid in the form of dividends. I can't wait for it to get to 10%+ for multiple positions.
Overall I've received 1.93% of my invested capital back in the form of dividends. In order to juice the paybacks I've been reinvesting most of my dividends into more shares. There's only a few positions that have the DRIP turned off including T from above.
Last year I took a look how the payback period is effected given different starting yields and dividend growth rates.
Do you have any great paybacks yet? Playing with house money?