Friday, 16 September 2011

DRIP math experiment

Hello Folks - it sure has been a bit of a crazy ride in the markets the last few weeks - as we are all aware.

RY.TO up well over one dollar yesterday and today down over a dollar today - no real reason for it that I can see.

As part of why I think Dividend investing is they way to go for me, I conducted a little math experiment on a spreadsheet with my KEG.UN holdings. The holding I have in this are enough for me to do the synthetic DRIP offered by TD Waterhouse, and as a result I get 1 unit each and every month, with a couple of extra dollars left over to accumulate in my account.

The assumptions of the experiment are:
1) - The stock price stays the same throughout
2) - The dividends are accumlated within the account were not DRIPped
3) - Only ran the numbers for three years

I found it interesting that by simply DRIPping my gains of three years outpaced that of Non-DRIPping by nearly 1.8% - by really doing nothing. This of course does not account for the added gains that my occur in the stock itself over that time, or for that matter any increases in the dividend itself.

Have a look:


  1. The value of holdings seems to be wrong at the end of the spread sheet. Share price of $13.10

    For DRIP 249*13.10=3261.90 Value of shares
    666.72 Dividends Earned

    Total Return of (3261.90+666.72-2803.40)/2803.40=40.14%

    For Non Drip 214*13.10= 2803.40
    616.32 Dividends Earned

    Total Return of

    Looking above, it appears you didn't add the share gain $ value of 157.20 for each year in calculation the year end value of holdings.

  2. Thanks for the input -

    However the $666.72 is the total amount of dividends that would be earned over the three years - out of which the new shares would be DRIPped.

    Share price : $13.10
    Starting Shares : 214
    Units DRIPped over 3 years : 36
    Surplus Dividends after Drip : $53.52, $65.04, $76.56 for a total of $195.12

    Final Result:

    ((((214+36)*13.10)+195.12)-(214*13.10))/(214*13.10) = 23.78%

    All comments are apreciated!