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Investing in Apple (APPL) To Reach FIRE
Intro and Apple’s (AAPL) Current metrics
In the previous article “Investing $50 A Week In Apple Can Make You How Much??!??”, we delved into if you invest $200 a month or $2400 a year in Apple (AAPL) what would be the final balance in 30 years? Turns out millions in the hypothetical scenario. To emphasize, this is a hypothetical scenario. The past performance of AAPL is not true of future performance. Take the results with a grain of salt.
However, let’s have fun in this fake scenario and try to answer the next question, how much do you have to invest each month or each year to live off the annual dividend income from AAPL. Let’s start with APPL’s current metrics. These numbers were gathered in January of 2023.
- 10-Year Capital Appreciation – 25.43%
- 3/5-Year Average Dividend Growth Rate – 7.17%
- 4-Year Average Dividend Yield – 0.85%
To understand how much you need to invest in AAPL to live off the annual dividend income, let’s go over a few pointers I have learned by analyzing the three parameters listed above for over 200 stocks.
- The three parameters listed above determine the outcome.
- In general, if the 10-year capital appreciation growth rate of a stock is greater than the 3/5-year average dividend growth rate, you will need to have a higher 4-year average dividend yield or invest more to live off the annual dividend income. It will also take longer to achieve FIRE to live off the dividend income, as in a mathematical sense, the share price races up ahead and the dividend growth rate cannot catch up. You will have a handsome final balance, but it will take years to reach the achievement of using the annual dividend income to pay for your living expenses.
- If the stock’s 3/5-year average dividend growth rate is greater than the 10-year capital appreciation growth rate, all things considered, it will take less time to reach FIRE and use the annual dividend income to pay for your living expenses.
- For example, if the 3/5-year average dividend growth rate is 12%, the 10-year capital appreciation growth rate is 10%, and the 4-year average dividend yield is 2.5%, hypothetically you would reach FIRE at a faster rate in comparison if you switch the rate of the 3/5-year average dividend growth rate and the 10-year capital appreciation growth rate.
- The 4-year average dividend yield is a sneaky but major factor in determining when the annual dividend income can pay for the living costs.
- Although it is exciting to buy a stock that has a dividend yield >= 10%, it is not tax efficient and not sustainable.
With AAPL’s current metrics, the likely outcome is that one will have to invest thousands to achieve FIRE since AAPL has an astounding 10-year capital appreciation growth rate, low yield, and moderate dividend growth rate.
Investment Plan
For consistency, the parameters below will be the same for future blogs. Except for the monthly and yearly contributions, because that is the question we are trying to answer.
- Monthly and Yearly Contributions – ???
- Living Costs – $70,000
- Inflation – 2.2%
- Tax Rate For Dividends – 15%
These parameters, including AAPL’s 10-year capital appreciation growth rate, 3/5-year average dividend growth rate, and 4-year average dividend yield, will be plugged into the Monthly Dividend Reinvestment Calculator to determine how much you will need to invest to live off the annual dividend income.
The goal is to invest the least and reach FIRE within 30 years!
Results
Turns out, when plugging the metrics in the calculator, you will need to invest a great amount and have perfect patience if you want to live off AAPL’s annual dividend income. You’ll need to invest $50,000 a year or $4,166.67 a month and wait 49 years to reach FIRE using the annual dividend income from AAPL to pay for your living costs. At the 49-year mark, in this hypothetical scenario, living costs per year (starting at $70,000 in year 1) would be $198,948.67, and the annual dividend income of $205,625.03 will just barely pay for your living costs.
I played around with the numbers in the calculator, and this was the most reasonable yearly/monthly contribution scenario I found appropriate. You could invest $100,000 a year and reach FIRE sooner in roughly 34 years, but is that realistic? I don’t think so, even 50K isn’t that realistic. However, in this fake scenario, it was the most reasonable number to reach FIRE within 50 years.
Check out the graph and table below! If you are interested in the monthly calculator and how I got these numbers, check out my Patreon page!
Thank you for reading! The next stock picked for this hypothetical scenario will be for the snackers and soda-drinking lovers in a new format! It will be a 3 part series blog to simply the format for easier reading. Click the Home button to explore or click the The Land Of Blogs button for more reads!
| Years | Yearly Dividends | Inflation Adjusted Living Costs | Yearly Interest | Final Balance |
|---|---|---|---|---|
| 1 | $832.83 | $70,000.00 | $7,270.31 | $349,473.34 |
| 2 | $2,336.45 | $71,540.00 | $23,471.41 | $1,131,536.20 |
| 3 | $3,732.63 | $73,113.88 | $44,703.90 | $2,156,009.18 |
| 4 | $5,051.11 | $74,722.39 | $72,384.18 | $3,491,121.18 |
| 5 | $6,310.29 | $76,366.28 | $108,338.23 | $5,224,880.40 |
| 6 | $7,527.26 | $78,046.34 | $154,919.39 | $7,470,706.39 |
| 7 | $8,717.82 | $79,763.36 | $215,158.90 | $10,374,684.40 |
| 8 | $9,896.53 | $81,518.15 | $292,959.52 | $14,124,895.60 |
| 9 | $11,076.81 | $83,311.55 | $393,344.57 | $18,963,418.40 |
| 10 | $12,271.07 | $85,144.40 | $522,778.28 | $25,201,765.18 |
| 11 | $13,490.88 | $87,017.58 | $689,577.84 | $33,240,738.12 |
| 12 | $14,747.13 | $88,931.97 | $904,443.36 | $43,595,968.33 |
| 13 | $16,050.14 | $90,888.47 | $1,181,139.55 | $56,930,764.67 |
| 14 | $17,409.85 | $92,888.02 | $1,537,372.50 | $74,098,363.64 |
| 15 | $18,835.88 | $94,931.55 | $1,995,917.32 | $96,196,270.35 |
| 16 | $20,337.74 | $97,020.05 | $2,586,068.58 | $124,636,149.99 |
| 17 | $21,924.88 | $99,154.49 | $3,345,505.65 | $161,233,719.37 |
| 18 | $23,606.80 | $101,335.89 | $4,322,691.96 | $208,324,361.16 |
| 19 | $25,393.20 | $103,565.28 | $5,579,960.76 | $268,911,820.84 |
| 20 | $27,294.00 | $105,843.71 | $7,197,483.77 | $346,859,452.59 |
| 21 | $29,319.45 | $108,172.27 | $9,278,375.58 | $447,136,188.79 |
| 22 | $31,480.25 | $110,552.06 | $11,955,258.49 | $576,132,891.43 |
| 23 | $33,787.57 | $112,984.21 | $15,398,705.92 | $742,069,224.43 |
| 24 | $36,253.18 | $115,469.86 | $19,828,101.74 | $955,516,948.03 |
| 25 | $38,889.48 | $118,010.20 | $25,525,606.89 | $1,230,072,947.90 |
| 26 | $41,709.60 | $120,606.42 | $32,854,122.44 | $1,583,224,843.68 |
| 27 | $44,727.50 | $123,259.76 | $42,280,392.47 | $2,037,464,280.86 |
| 28 | $47,957.99 | $125,971.48 | $54,404,717.62 | $2,621,718,777.34 |
| 29 | $51,416.86 | $128,742.85 | $69,999,170.78 | $3,373,193,275.06 |
| 30 | $55,120.97 | $131,575.19 | $90,056,747.71 | $4,339,738,628.16 |
| 31 | $59,084.17 | $134,469.85 | $115,846,290.63 | $5,582,496,138.35 |
| 32 | $63,327.74 | $137,428.18 | $149,010,765.92 | $7,180,646,212.10 |
| 33 | $67,874.81 | $140,451.60 | $191,666,129.61 | $9,236,142,675.56 |
| 34 | $72,747.21 | $143,541.54 | $246,528,045.85 | $11,879,853,207.77 |
| 35 | $77,968.34 | $146,699.45 | $317,089,349.86 | $15,280,091,832.21 |
| 36 | $83,563.28 | $149,926.84 | $407,842,311.92 | $19,653,333,712.78 |
| 37 | $89,558.88 | $153,225.23 | $524,564,613.02 | $25,277,995,848.04 |
| 38 | $95,983.93 | $156,596.19 | $674,687,148.56 | $32,512,160,930.09 |
| 39 | $102,869.26 | $160,041.30 | $867,767,074.28 | $41,816,372,652.37 |
| 40 | $110,247.91 | $163,562.21 | $1,116,096,208.05 | $53,782,953,594.56 |
| 41 | $118,155.31 | $167,160.58 | $1,435,483,517.84 | $69,173,712,033.39 |
| 42 | $126,629.38 | $170,838.11 | $1,846,261,508.21 | $88,968,438,059.81 |
| 43 | $135,710.79 | $174,596.55 | $2,374,580,571.08 | $114,427,276,219.30 |
| 44 | $145,443.12 | $178,437.68 | $3,054,073,697.87 | $147,170,945,258.86 |
| 45 | $155,873.06 | $182,363.31 | $3,927,997,526.91 | $189,283,911,693.74 |
| 46 | $167,050.64 | $186,375.30 | $5,051,986,023.37 | $243,447,085,125.25 |
| 47 | $179,029.50 | $190,475.55 | $6,497,592,088.13 | $313,108,482,567.77 |
| 48 | $191,867.10 | $194,666.02 | $8,356,842,551.27 | $402,702,726,113.53 |
| 49 | $205,625.03 | $198,948.67 | $10,748,096,516.56 | $517,933,346,947.80 |
| 50 | $220,369.29 | $203,325.54 | $13,823,579,993.61 | $666,135,866,919.21 |