How To Learn & Test MOAC
To understand the Compound Return module (aka MOAC) do the following tests:
Create a new Manual Asset and select:
Asset Sub-Type Securities
Quantity 10,000
Price $10
Current Yield 5%
NOTE: To learn and test MOAC it is highly recommended to use simple round numbers (and keep Reinvest Income OFF initially).
Click Save. You will now have a dividend "stock" asset showing $100,000 in Current Value.
Now test the following scenarios in MOAC:
Annual Appreciation 0%. Yield Growth Rate 0%. Results "Yield" stays the same every year. Reasonable as stock price and dividend per share have no change. Yield should be the same.
Annual Appreciation 5%. Yield Growth Rate 0%. Results "Yield" goes down every year. Reasonable as if stock price goes up and dividend per share has no change. Yield should go down.
Annual Appreciation 2%. Yield Growth Rate 5%. Results "Yield" goes up +3% every year. Reasonable as if dividend per shares goes up faster than stock price. Yield should go up.
Annual Appreciation 5%. Yield Growth Rate 5%. Results "Yield" stay the same every year. Reasonable as stock price and dividend per share increase at the same pace. Yield should be the same.
Annual Appreciation 5%. Yield Growth Rate 2%. Results "Yield" goes down -3% every year. Reasonable as if stock price goes up faster than dividend per share. Yield should go down.
NOTES:
Current Yield is used to calculate a starting nominal $ value of (dividends) paid, it is not used as an absolute %. Ie; Price = $10 x Current Yield = 5% in Results will be Yield = 5% and Income = $.50 cents.
Results "Yield" will only increase annually (in % terms) IF Yield Growth Rate field is also used.
Otherwise, the nominal $ value of the dividend will remain the same as year 1 (year 1 = 5% & $.50, year 2 = 5% & $.50, year 3 = 5% & $.50)
If Annual Appreciation is used (ie; 10%) it would cause the Yield to go down each year while nominal $ amount remains constant (year 1 = 5% & $.50, year 2 = 4.5% & $.50, year 3 = 4.05% & $.50)
In order to reproduce realistic results of a blue chip dividend growth company (ie; JNJ, KO, MCD, MO, etc aka "High Growth" Compounder) user will have to enter values in all 3 fields to simulate real world results:
Current (Dividend) Yield = 5%
Yield Growth Rate 5%
Annual Appreciation 5%
Would cause Yield to increase by 5% annually, nominal $ paid to increase by 5% annually, and share price to increase by 5% annually.
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