07-04-2014, 10:15 PM
(This post was last modified: 07-04-2014, 10:16 PM by earthtodan.)
Come to think of it, 3% DGR is probably too generous an assumption for ARCP. The Red Lobster lease escalator is 2% for 25 years, and that represents 12% of the portfolio, so I will model 2% DGR instead. This turns out to make a big difference over time.
As before, in year 5, Red Lobster goes out of business, interest rates spike, the dividend is cut by 30%, and the stock price also falls 30%. For 5 years following, the DGR and growth stagnate at 1%. Afterward the default growth rates continue.
After 10 years, $1000 on DRIP turns into $1,817 in principal paying $143/year in dividends.
After 20 years, $1000 on DRIP turns into $4,563 in principal paying $362/year in dividends.
After 30 years, $1000 on DRIP turns into $11,614 in principal paying $925/year in dividends.
As before, in year 5, Red Lobster goes out of business, interest rates spike, the dividend is cut by 30%, and the stock price also falls 30%. For 5 years following, the DGR and growth stagnate at 1%. Afterward the default growth rates continue.
After 10 years, $1000 on DRIP turns into $1,817 in principal paying $143/year in dividends.
After 20 years, $1000 on DRIP turns into $4,563 in principal paying $362/year in dividends.
After 30 years, $1000 on DRIP turns into $11,614 in principal paying $925/year in dividends.