Forecasting Stock Gains in Retirement

Do you wonder what your stocks will be worth in ten years? I do. 

First, let's admit that foretelling the future is a mug's game. That said, calculating a reasonable future value for a stock and a reasonable dividend yield can be illuminating. When the calculated numbers are not as expected but much lower, such numbers can be considered a red flag, a warning, and it may be time to rethink one's plans.

Let's say a retiree owns 500 shares of Royal Bank. He/she spends the dividends as they are received in order to live. As for the stock itself, it is held indefinitely so as not to kill the goose that laid the golden egg.

I am very much like the retiree described above. Removing all the dividends to pay the bills made me wonder if I am draining my portfolio. I was worried when I started down this path. Now, 14 years later, I am not so concerned. My retirement portfolio, despite the withdrawals, has more than doubled in value.

• What could Royal Bank stock be worth in ten years?
• What would be a reasonable guess for the Royal Bank dividend payment ten years from now?

To answer these questions, go to TipRanks dashboard and click on Research Tools at the top of the page. Under Dividend Investing click on Dividend Calculator.

Today 500 Royal Bank shares have a dividend yield of about $1930 annually. In a decade, according to the calculator, an annual dividend income of about $5260 is possible. After all, the Royal Bank has a history of regularly raising its dividend. The calculator is simply using past increases to predict future ones.

Personally, I'd like to suggest that the Royal Bank has historically paid a dividend of about four percent. If the stock is worth $132,500 in a decade, then a four percent yield would yield about $5300. My forecast is lower than the calculator's but it is still a good income.

There is one thing we do know for certain, the past will not be repeated -- at least not perfectly. But, our calculations clearly indicate a good outcome is not just possible but to be expected. That's good enough for me.