Month: October 2024

The are currently 2 Monitored Dividend Strategies:

The Monitored Dividend Capture Strategies require daily monitoring which are a lot more complicated in terms of deployment compared to Scheduled Dividend Capture Strategies.

In addition, when using Monitored Dividend Capture Strategy, “self funding” of a regular investment plan will be more challenging as the dividends to be captured are less predictable than that of Scheduled Dividend Capture Strategy.

The above is the typical flow chart of a Monitored Dividend Capture Strategy

Let us take a look at the performances of the investment using MDCS-CV and MDCS-FP for the past 11 months. Then, you be your own judge if MDCS-CV or MDCS-FP are better. The examples below are based on $10,000 investment on a regular investment plan.

Dividend Captured using MDCS-CV for the last 11 months ($1499.12) projected at 15% Annual Dividend Payout Rate

Dividend captured using MDCS-FP for the last 11 months ($1498.13) projected at 15% Annual Dividend Payout Rate

Cash Value of MDCS-CV for the last 11 months ($16315.18 + $10,000 Year 2 Investment) Projected Cash Value in this case refers to the fund invested.

Cash Value of MDCS-FP for the last 11 months ($16130.98 + $10,000 Year 2 Investment) Projected Cash Value in this case refers to the fund invested.

Cash Value & Dividend of MDCS-FP for the last 11 months ($17814.30 + $10,000 Year 2 Investment) Projected Value in this case refers to the fund invested.

Cash Value & Dividend of MDCS-FP for the last 11 months ($17629.11 + $10,000 Year 2 Investment) Projected Value in this case refers to the fund invested.

Frequency of dividend payment of MDCS-CV: 8 out of 11 month

Frequency of dividend payment of MDCS-FP: 8 out of 11 month

Table of Comparisons for MDCS-CV vs MDCS-FP

For the past 11 months, based on an investment of $10,000, MDCS-CV has a better performance than MDCS-FP in areas of “Dividend Captured”, “Cash Value” and “Cash Value + Dividend”. As for the frequency of dividend distributions, both MDCS-CV and MDCS-FP are the same.

The actual performance of both the Monitored Dividend Capture Strategies, MDCS-CV and MDCS-FP have outperform the range of potential dividend payout rate (8% – 14%) at 14.9% (for 11 months) mentioned in the earlier article “Different (DCS) Dividend Capture Strategies” on 15 Aug 2023.

https://articles.dividendcapturestrategy.com/2023/08

Disclaimer:

Do note the above is for educational and sharing purposes only. They are not meant to be investment advice. For any investment or financial planning advice, please approach your financial planner or investment specialist.

What do we understand when we talk about “Self Funding” in Dividend Capture Strategy in Regular Investment Plan?

A regular investment plan requires investor to fund the investment on a regular basis. The frequency of funding varies from monthly, quarterly, half yearly to yearly. There is typically a prefixed number of years of premium payment which an investor need to commit to, else penalties may apply.

Self Funding is therefore defined as using a smaller amount of fund than specified in the plan to generate income to fund the investment itself, increasing investment account value and increasing income perpetually. Turning the investment into a “Automated Money Making Machine”, “Automated Money Printer” or some call it “Perpetual Profit Centre”.

Example: A 10-Year Regular Investment-linked Plan requires an investor to minimally fund 10 years of premium of the plan. However, using Scheduled Dividend Capture Strategy (SDCS), investor only need to fund it for the first 3 years, thereafter the plan will generate sufficient passive income (dividend) to fund it perpetually. Thus, progressively increases its dividend (passive income) and its cash value (investment account value) over time.

Theoretically, so long as your investment can generate a yearly income of 20%, in 3 years time, you will be able to self fund the regular plan perpetually. Assuming that the the account value stays stagnant. See below.

Table 1: 3-years Self Funding based on 20% yearly income.

The above table is based on the assumption that the account value stays stagnant. However, in real life, fund prices fluctuates everyday so long as the market is opened, thus the account values do not stay stagnant, especially when we are deploying Scheduled Dividend Capture Strategy (SDCS-S2 or SDCS-S3). They typically trend down in each intra-year but trend up over medium to long term, year on year. See below.

Do note that all the table or the charts below are based on a annual premium $100,000 investment linked plan.

Chart 1: Cash Value Line Chart

Based on the Bar Chart of the cash value, it’s increasing Year-On-Year,

Chart 2: Yearly Cash Value Bar Chart

With an increasing cash value, we expect an increasing dividend of the investment, since dividend is issued at % of the Cash Value or the NAV. Let take a look if it is still possible possible to Self Fund in 3 years when the investment cash value fluctuates. Let take a look at the dividend and see if it’s still able to achieve 20% payout.

Chart 3: Actual Dividend Payout Vs 20% Dividend Payout Projection

Since the red line (Actual Accumulated Dividend) is always above the green line (20% Dividend Payout Projection), this shows that the investment actual dividend payout rate is above is always above 20% since 2019. The dividend has always been increasing year on year just like the Cash Value. Look at the Bar Chart below, The dividend has been increasing year on year. Do note that the Bar for Year 2024 is not a complete year yet.

Chart 4: Yearly Dividend Bar Chart

Table 2: Actual Dividend Collected to Self Fund with an initial amount of $300,000

(A) is my bank savings account which I deposited the initial $300,000; (B) is the dedicated bank savings account set up for collecting the dividend from my DCS Investment; (C) is the premium I paid to the financial institution I invest with.

The dividend is updated as of 16 Sep 2024. There’s another 3 months of dividend to 16 Dec 2024 not factored in yet. From just the current amount of dividend collected of $114,717.67, we can see that Self-Funding of my investment is already achieved.

With the above Bar Charts, Line Graph and tables, we can conclude that Self fund is possible even when there’s a typical intra-year down trend and a medium to long term up trend of cash value , based on the first 5 years data collected.

Disclaimer:

Do note the above is for educational and sharing purposes only. They are not meant to be investment advice. For any investment or financial planning advice, please approach your financial planner or investment specialist.

My DCS Journey began with my first meeting with my financial planner on this topic of creating passive income in the month of November 2019. It is also during the meeting when my financial planner shared about Dividend Capture Strategy, DCS. There’s a few important points that I retained till today

20% Annual Dividend Payout Rate, ADPR

Self-Funding my 10-years regular investment plan in 3-4 years

Increasing Dividend Payout (Passive income)

Increasing Investment Account Value (Cash Value / Capital)

Increasing Insurance Coverage

In December 2024, I made up mind to invest and embark on my DCS Journey on 16 Dec 2019. Since then, I never look back. Let me share with you more.

On November 2019, I was exploring using a regular investment plan to grow my passive income and at the same time manage my growing insurance needs in difference phases of my life. After some discussion with my financial planner, I decided on a regular investment linked plan.

Table 1: Self Funding Illustration

I have set aside $300,000 as an initial budget and target to self-fund a 10 years regular investment-linked plan after 3 years, based on a 20% Annual Dividend Payout Rate. (My annual premium is $100,000.) However, I reserved some extra funds for standby purposes, in case of unforeseen market turbulence.

On 16 December 2024, my regular investment linked plan is incepted. Like most of the regular investment linked plan, they come with some bonus investment units. After some discussion, my financial planner and I decided to take those extra units as a buffer for market fluctuations and not to include those them for our projection. Perhaps, I was just being my usual cautious self.

Below are my actual results in Oct 2024… …

Chart 1: Actual Accumulated Dividend vs 20% Projected Dividend

20% Annual Dividend Payout Rate, ADPR

In the above chart, the red line represents the actual accumulated dividend collected and the green line represents the 20% accumulated dividend projection. As you can see the 20% projected accumulated dividend as of 16 Sep 2024 is clearly outperformed by my actual accumulated dividend collected. The projection of 20% of the accumulated dividend is supposed to be $283,333.33 but the actual dividend collected was $314,717.67 which is 11.07% above projection.

((314,717.67 – 283,333.33)/ 283,333.33) x 100% = 11.07%

Table 2: Actual Dividend Collected to Self Fund with an initial amount of $300,000

(A) is my bank savings account which I deposited the initial $300,000; (B) is the dedicated bank savings account set up for collecting the dividend from my DCS Investment; (C) is the premium I paid to the financial institution I invest with.

The dividend is updated as of 16 Sep 2024. There’s another 3 months of dividend to 16 Dec 2024 not factored in yet. From just the current amount of dividend collected of $114,717.67, we can see that Self-Funding of my investment is already achieved.

Chart 2: My increasing Dividend since Dec 2019

I collected $39,188.31 in the first 12 months. In the next 12 months, I received $50,545.97. On the subsequent 12 months, I collected another $69,365.95 and by the 48th month, I have another $82,406.57. As of 16 Sep 2024, I have already collected $73210.87. With another 2 more months of dividend to be collected, breaking the previous year (Yr 2023) dividend is definitely on track. Therefore, for the past 5 years, increasing dividend is as well achieved in my investment.

Chart 3: Monthly Dividend from Dec 2023 to Sep 2024

For the past 5 years, I have always been looking for to the monthly dividend. Typically 2-3 payments per month.

Chart 4: Increasing Cash Value of my investment in the past 5 years

Chart 5: Cash Value with premium (Yellow Box) paid for Year 6

Increasing Cash Value is noticed in my investment year on year. The overall cash value in the my regular investment linked plan, excluding dividend collected is on an uptrend based on Chart 3.

Based on the bar chart of the Cash value in Chart 5, we can also see an increasing Cash value year on year since Dec 2019. The premium to be paid in Dec 2024 is already currently in My Local Bank Savings Account 2 ($114,717.67) in Table 2. Once the payment of premium, the cash value will be $361,160.92

Table 3: Increasing Insurance Coverage

While growing my passive income for my retirement and legacy planning, I am also increasing my insurance coverage, thus increasing protection for my love ones as part of my estate plan. In the past 5 years, I used $300,000 to self fund a 10 years regular investment linked plan to build an increasing capital, increasing passive income and increasing insurance coverage. Now, I have an insurance coverage of $505,000 in event of death.

Chart 6: Projected Dividend in 20 years

The above is charted based on the actual dividend collected in the first 4 years of my investment. This is basically for illustration sharing purposes only.

That’s all for my DCS Journey. I hope that you find my sharing above useful. I wish you all the best and success in your DCS investment journey.

Disclaimer:

Do note the above is for educational and sharing purposes only. They are not meant to be investment advice. For any investment or financial planning advice, please approach your financial planner or investment specialist.