Firstly I need to consider how much money I would need on a yearly basis to be able to leave the daily grind of 9-5. I have come off with the figure of £18000 after tax. This would give me £1500 monthly, which means this is the amount of dividend money I need to get each month. I plan to hold the GSK shares in a stocks and shares ISA which means that I will not have to pay tax on any dividends received.
Basically I need to find out how many GlaxoSmithKline shares I would need to get £18000 a year in dividends. Looking at the GSK dividend history from 2014 I can see that the company paid shareholders 80 pence per share. Of course I have to assume that the dividend payments will stay stable at 80 pence per share, or even better increase each year. Doing a quick calculation I can see that I would need to hold 22500 GlaxoSmithKline shares. Now for the scary fact, the price these would cost. Yep a rough calculation at the current share price tells me these would cost me a staggering £339 975.
Of course I want to reach this holding by the time I am 45, which gives me 12 years. Even then 339 975 divided by 12 means I would need to invest £28331 per year. I have to be honest and say that it is not possible for me to invest anywhere near this amount. I could possibly invest 10% or maybe 20% of this amount.
So what now? Do I give up or rethink my strategy? Well I will never give up. I guess I will try and invest as much as I can each year and reinvest all my dividends into more shares. This will help me reach my target of 22500 shares sooner rather than later. Dividend growth starts to happen quickly when your dividend payments rise. The company could also grow and increase their dividend payment so this would help me too. Who knows what the future may bring.
However it is unlikely I would risk all my money in one company, no matter how secure they appear in today’s market. I wish I could afford so many GSK shares though. Have you set yourself an annual dividend target which would generate enough income for you to retire early?