Let's experiment with $O ๐คญ | 21
Experimenting Realty Income stock for DRIP growth
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Now letโs talk about this experiment.
We all know how important it is to DRIP ๐ฆ in a Dividend Growth Investment strategy. I am going to run a 5-year long experiment starting from July 15th, 2022 to see it. Of course backtesting the data is easier, but itโs no fun - what could happen has already happened. Plus it takes a lot more when you are invested in an investment or experiment.
Overview
๐ง๐ฝโ๐ฌ Experiment
โ๏ธ History
๐ฎ Future expectations
๐ง๐ฝโ๐ฌ Experiment
The goal of the experiment will be to see the impact of DRIP ๐ฆ on a dividend growth stock. I will compare the dividend generated from DRIPping and not dripping and the difference between shares owned. I will DRIP the dividend received each month and see the growth or lack thereof.
The experiment is going to be simple and with my current O 0.00%โ holding. I currently own 364.52405 shares of O 0.00%โ at an average price of $65.25, amounting to $23,783.80. O 0.00%โ is selected for the experiment because it has a rich history of paying the dividend and increasing it. It has paid 625 consecutive and increased 116 times. Besides, it also is a monthly dividend stock, so DRIPping will work best as it will be DCAing as well.
The experiment already started last month when I received $89.90 in dividends and I re-invested the amount. The experiment will end on June 16th, 2026. I will stop the experiment if there are the following events:
Realty Income deteriorates its business and I have to exit the position
If I need money desperately and need to exit the position
โ๏ธ History
Letโs see what the past has to say about what we can expect from this experiment. I backtested the last 5 years of data to find the following. I bought $10k worth of O 0.00%โ on 8/29/2017.
๐ธ Dividend amount: The dividend amount collected for DRIPped version is more (as expected). In the 5 years, the dividend collected went from $44.60 for both DRIP and non-DRIP to $70.15 for the DRIP variant and $53.84 for the non-DRIP variant. The dividend amount increased by 57.28% for the DRIP variant while it increased by just 20.72% for the non-DRIP variant thanks to a 3.3% dividend CAGR.
๐ฐ Shares owned: The number of shares owned by DRIP should be higher as they are re-invested. And the number of shares owned by non-drip will be constant. Total shares owned for the DRIP variant increased from 217.1081198 to 282.8434648 an increase of 30%, while for the no-DRIP variant it remained constant at 217.1081198.
๐ฅง Total return: Total return is quite interesting, with a 4% dividend yield, 3.48% 5-Year Dividend CAGR, and 6.07% 5-year growth CAGR, the total return is at 13.63% CAGR for 5 years. The no-DRIP returns at 5.98% 5-year CAGR while SPY 0.00%โ returns at 10.97%. While SP500 is beating O 0.00%โ without DRIP, with DRIP $O has outperformed SPY 0.00%โ.
๐ฎ Future expectations
The expectations derived from the past are as follows:
DRIP dividend will be higher than No-DRIP
DRIP number of shares will be higher than No-DRIP
DRIP variant will outperform SP500
Letโs see if all of these will be true or not in 5 years. 1 and 2 will be true.
The takeaway from this post:
I already know the outcome of the experiment
I am running experiments to discipline myself
Again congratulations on the new milestone ๐ฅ