Recently, a study is conducted on 10 years projected IRR, Internal Rate of Return for both SDCS-S2 and SDCS-S3.
Let’s see among the 2 scheduled dividend capture strategies, SDCS-S2 and SDCS-S3, which strategy gives a better IRR, Internal Rate of Return?
Note: The following measurements are based on the Year 1 to Year 4 of actual dividend and Year 5 to Year 10 of projected dividend. The projected cash values of $562,500 were added to the Year 10. Please see below.
First 4 years of actual dividends received from SDCS-S2
First 4 years of actual dividends received from SDCS-S3
The following 2 tables of calculations of IRR, Internal Rate of Return are based on $100,000 invested on yearly basis and the accumulated dividends in each year are only made available in the beginning on the following year. Expenses represent the premium paid and the income represent dividend received.
Internal Rate of Return of SDCS-S2
Internal Rate of Return of SDCS-S3
Based on the above 2 table of calculations of the IRR for SDCS-S2 and SDCS-S3, SDCS-S3 has a higher IRR than SDCS-S2. IRR of SDCS-S3 is 12.97% and that of SDCS-S2 is 12..19%. Therefore, SDCS-S3 is better than SDCS-S2 in the terms of IRR.
Some investors have a different opinion about the above IRR Calculations and the data used. They felt that the dividend starts accumulating and available from the first month and not at the beginning of the following year. Therefore, they felt that the tables of data should look like the following revised ones instead.
Internal Rate of Return of SDCS-S2 (Revised)
Internal Rate of Return of SDCS-S3 (Revised)
As you can see from the above examples, the availability of dividends make a big difference in the calculations of the IRR, Internal Rate of Return.
For the SDCS-S2, it’s a 8.06% difference in the IRR. Whereas, it’s a difference of 8.84% in IRR for the SDCS-S3.
For information of Projected Cash Value and projected dividend, see below.
Projected Cash Value
The above is only a 24-years projection of the cash value and not the actual cash value. We do not ensure its accuracy and it’s solely for the purpose of projected IRR calculation only.
Actual and Projected Dividends
