Follow the dividend investment decisions of a person who has no background in financial investment and wishes to take control of their financial future.

Portfolio Experiment - Month 1 - 31 Dec 2016 13:08



Our first month into the experiment is completed. As a reminder this experiment was based on creating an imaginary MOTIF portfolio using $10,000.

We initiated our positions on December 2 right in the middle of the end of year stock rally. With markets elevated near all time highs my expectations were pretty low on performance growth. However, there was a surprise as the portfolio actually grew and here is a summary of the performance:

Dividend Income

Projected dividend income $8.23
Actual dividend income $8.29
Apparent Growth of $0.06
Actual Growth 0

Looking at the dividend growth, initially it looks like we already received a raise but looks are deceiving. The variation is due to the ETFs within the portfolio which do not payout on a consistent basis. If we remove the ETF variance then dividend growth is actually zero and came in as planned.

Portfolio Value

Starting Value $10,000
Ending Value $10,217
Growth 2.17%

The Overall portfolio value was a pleasant surprise. Initiating the portfolio during market highs I actually expected a breakeven or slight loss but somehow we garnered 2.17% in growth. The biggest contributors to this growth was Technology & Telecommunications with 7% gain and Real Estate with a 3.73% gain. Overall here is how each sector and allocation grew for the month of December

Portfolio Sector & % Allocation Gain/Loss
FINANCIALS - 10% 2.80%
HEALTHCARE - 10% -0.10%
INDUSTRIALS - 10% 1.20%
REAL ESTATE - 15% 3.73%
UTILITIES - 6% 1.0%
BONDS & INCOME - 8% 0.25%

Once we have next months actuals there will be enough data points to start graphing. Looks like we are off to a decent start hopefully it will continue into the new year. :) - Comments: 0

End of Year Portfolio Tune-up - 23 Dec 2016 22:04



Investors everywhere will be evaluating their year-end portfolio performance and will be impressed. 2016 has been a pretty good year for investors and most will see gains in some form or another. A few will admire their dividend growth, others their capital gains and some may admire both.

Take a moment and feel proud of your accomplishment! Let it motivate you to continue investing into 2017 and beyond. Now that you are feeling good, let’s take a deep breath and remember the investing rules that got you to this point and take the time to re-evaluate and give your portfolio a tune-up. Here are 4 steps I run through at the end of the year to keep me on pace.

1. Update mid and long term goals

Has there been any major life changes throughout the year? Maybe you got married, had a child, bought a house or changed jobs. Do you need to adjust a mid or long term goal or maybe even add an additional goal?

Also, do not limit yourself to just investing goals. Use this time to also consider if you have adequate insurance coverage. Do you need to increase life, home or auto coverage? What about disability insurance?

2. Review Portfolio Holdings Financials

If you have a lot of holdings this could be a bit tedious but it is vital to know the financial health of your holdings. Check earnings, debt, cash flow, investments, and acquisitions. Also use this time to read a few annual reports and read the CEO’s letter to shareholders to evaluate if the CEO’s tone or strategy has changed.

3. Time to Sell?

Have some losers or under-performers? Are you holding on to these emotionally, hoping that you can get back to a break-even point before you sell? I get it, no one likes losing but the faster you admit the mistake and sell the quicker you can put it behind you and relieve any stress going forward.

Do not forget about over-performers. A rule I use for high dividend growth stocks that I have owned more than 1 year is if the stock price has appreciated 4x faster than the divided from the time of purchase then it is a potential to sell, I’ve nicknamed this rule “The Prune Ratio”. For example:

I bought Thor Industries (THO) two years ago at $53.25/share and a 2.05% dividend yield. Currently THO sits at $102/share and a 1.3% dividend. In just two years there is a 90% capital gain and 22% dividend growth. The stock price has appreciated 4x faster than the dividend growth so the logical step is to lock in the gains and re-invest into a higher yield with similar dividend growth. I just need to decide if I want to sell a portion (pruning) or sell the entire position.

4. To DRIP (or not)

Some investors always DRIP and some never DRIP. For myself I use a hybrid approach where I only DRIP select holdings.

A dividend re-investment program is a powerful tool available to investors to quickly re-invest dividends without any effort or much thought. However, there are arguments for and against DRIP’s and while both sides have valid points I favor neither.

Instead I evaluate a stock’s current dividend in relation to its dividend growth rate. If it is favorable I will DRIP the stock and if not I turn the DRIP off. At this time of year I will evaluate which stocks meet my criteria in the table below. For example:

I originally bought GATX Corp. (GATX) with a 4% dividend yield and a 10 year dividend growth rate of 6.77%, because this met the requirements in the table below I decided to DRIP new shares. As I re-evaluate my portfolio GATX now only yields 2.53% and does not meet the minimum growth rate of 9.7% so I will have to stop DRIP’g shares.

Yield Growth Rate
2.00% 11.50%
2.50% 9.70%
3.00% 8.00%
3.50% 6.70%
4.00% 5.50%
4.50% 4.30%
5.00% 3.20%
5.50% 2.00%
6.00% 1.00%

I have performed this process of re-evaluating twice a year for the last 6 years and it has kept my portfolio on track to meet my goals. Though I do recommend you perform the tune-up before the new year so if you have to sell any losers you can capitalize on tax loss harvesting before years end.

Happy Holidays Everyone! - Comments: 0

Experimental Portfolio Begins - 03 Dec 2016 01:10

Tags: potfolio-experiment

As promised in an earlier post I started a fictional $10,000 Motif Portfolio based on 12/2/16 market closing prices. The projected annual income is $391.67 or a 3.916% yield.

Base Portfolio as of 12/2/2016
Portfolio Value Projected Dividend Income
$10,000 $391.67

Not too bad of a yield considering the market is at an all time high but personally if I had to buy all of these holdings individually I would never have bought everything at once and would have waited for better prices. However, the point of the experiment is to see how a diversified portfolio in Motif will act.

While putting together the final numbers I thought all of the holdings were past their ex-dividend date but there were two pleasant surprises that will generate a whopping $7.19 for this month and is a nice start to generating our fictional cash flow. One area that may slightly skew the numbers will be the ETFs as the monthly dividend varies from month to month.

Now onto the good part…based on the original percentage allocation here are how many shares of each holding we bought with our fictional $10K.

Position Symbol Shares
Compass Minerals CMP 5.1282
Wal-Mart WMT 5.6433
General Motors GM 11.2962
Cracker Barrel Restaurants CBRL 2.4096
P&G PG 4.8544
Archer Daniel Midland ADM 9.0909
Petmed Express PETS 17.8492
Travelers Insurance TRV 4.3234
Canadian Imperial Bank of Commerce CM 6.1207
Johnson & Johnson JNJ 4.4659
Merck MRK 8.1793
3M MMM 2.8997
Emerson Electric EMR 8.8731
Omega Healthcare Invest OHI 17.094
STAG Industrial STAG 21.3493
W.P. Carey WPC 8.6775
Apple AAPL 3.6397
AT & T T 12.95
Microsoft MSFT 6.7511
Artesian Resources Corporation ARTNA 9.4073
PPL Corp PPL 8.9982
iShares iBoxx $ High Yield Corporate Bd HYG 2.3425
iShares iBoxx $ Invst Grade Crp Bond LQD 1.7182
iShares 20+ Year Treasury Bond TLT 1.6722
iShares S&P US Pref Stock Idx PFF 5.4025

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