stock analysisIt’s that time of year again.  A new year is starting so it’s a good time to look back at the previous year to see how our dividend growth investing went.

The start of a year brings an opportune time to review our past investing.  We want to review the investment actions we took in the prior year to make sure we are sticking with our investing process and not making any investing errors.  We want to review our current portfolio to make sure the companies are performing to our expectations and decide if we need to make any changes.  Last, we want to set goals for the upcoming year to strive for in our investing.

I’m going to take this opportunity to show you exactly how I review my dividend growth investing from the prior year and get ready for the new year ahead.

My Dividend Growth Portfolio Performance

With reviewing the performance of my dividend growth investment account, I like to compare against the S&P 500 index.  My goal is always to beat the index although I realize this won’t be possible 100% of the time.

My feelings are that I should be able to beat the index a majority of the time or else I would be better off just purchasing the index itself and not putting in the effort of trading individual stocks.

However, I also have the goal of a growing passive income which owning individual dividend growth stocks provides me.  Also, I enjoy the process of investing too much to just purchase an index fund.  I like the process of finding, researching and buying stocks.

But I’m also competitive so I want to see how I’m doing against the S&P 500 index.  Let’s take a look at my performance in 2013 compared to the S&P 500.

The S&P 500 ended 2012 at 1,426.19.  The trend for the market was up pretty much all year and the S&P 500 finished 2013 quite a bit higher at 1,848.36.  This gives the S&P 500 a return in 2013 of 29.6%.  Pretty dang good year to be in the market!

While the S&P 500 did very well in 2013, I’m extremely pleased to say that my own results were better!  According to my calculations, I finished out 2013 with a total return of 33.8%.  This means I beat out the S&P 500 by just over 4%.

I’m very pleased with my dividend growth investing total return results from 2013.

My Dividend Growth Portfolio Actions in 2013

The year 2013 was a good year for me and my dividend growth investing portfolio.  Let’s take a look at the actions I took in 2013.

What I want to do is review my trades and make sure that I always stuck to my plan.  I want to make sure I didn’t take any unnecessary risks or make any trades that don’t agree with my investing strategy.

A quick glance at the trades that I made in my portfolio in 2013 shows me that I made zero sales.  This is a good thing.  I’m a long term investor and when I buy stocks I have the intention of holding my companies forever.  There are just a few reasons I would sell a stock.  These reasons are:

  1. Sell a stock if something negative affects the long term profitability of the company.
  2. Review and possibly sell a company if they fail to meet my dividend growth expectations in the prior year.
  3. Sell a stock if the market is offering a ridiculously high valuation.

I’d prefer not to sell the companies I own in my portfolio.  If I’m selling, I incur commissions costs and capital gains taxes.  One of my goals is to keep my costs low.  Also, if I’m selling it means one of my companies failed to meet my expectations.  I prefer when my companies do what I want them to do and make me money.

When reviewing my transactions from 2013, I find that I made 11 buy transactions.  I purchased an insurance company, a couple oil companies, a few different tobacco companies, a bank and a beverage giant.  Here are the companies I purchased in 2013:

  1. Aflac (AFL) – My love for Aflac is no secret.  I still think they offer great value today.  Aflac has a dividend growth streak of 31 years.  I’m very happy with my Aflac purchase this past year as it fits in perfectly with my investment strategy.
  2. ConocoPhillips (COP) – I believe oil companies are very shareholder friendly companies.  I picked up shares of COP this past year as they have a 13 year long dividend growth streak.  This investment also fits well in my strategy and I am pleased with this buy.
  3. Deere & Co. (DE) - Deere & Co. is another company I believe to offer good current value.  I picked up some shares earlier this year when I thought Deere was trading at a good price.  Deere has a 10 year dividend growth streak and I am happy with this purchase.
  4. Lorillard (LO) – This is the first tobacco company I purchased this year.  Tobacco companies also tend to be very shareholder friendly with high dividend payouts and stock repurchases.  Lorillard has a 6 year dividend growth streak.
  5. Wells Fargo (WFC) - Wells Fargo is a bank that was forced to cut it’s dividend rate back in 2008.  Since then they have started to grow their dividend again.  I picked up shares of Wells Fargo because they were trading at what I considered a good value and also because it is the favorite bank of the famed Warren Buffet.  This trade was a reach outside my investing rules because they have less than a 5 year dividend growth streak but I believe it will work out in the long term.
  6. Philip Morris (PM) – This is the second tobacco stock I purchased in 2013.  Philip Morris has 6 years of dividend growth and I believe plenty more to come with their international tobacco business.
  7. Altria Group (MO) – I made two purchases of Altria this past year.  I like the higher dividend yield, the share repurchase program and the lower valuation when I made my buys.  Also, Altria has a very long 45 year dividend growth streak.  I’m pleased to own Altria.
  8. CSX Corp. (CSX) - CSX is a railroad company with 9 years of dividend growth.  I think they fit well within my strategy and my portfolio overall.
  9. Chevron (CVX) - Chevron was my second oil company purchase this year.  Demand for oil will continue to rise in the future and Chevron has a 26 year dividend growth streak.  I’m happy to add this oil giant to my portfolio.
  10. Coca-Cola Company (KO) – Coca-Cola is one of my favorite companies and I wanted to pick up more shares in 2013.  While I don’t believe I got a great value, I believe picking up fair valued shares of Coca-Cola will still turn out to be a good decision over the long term.  Coca-Cola has a 51 year dividend growth streak.  This is one of my core holdings in my portfolio and I’m always happy to pick up more shares.

Reviewing my purchases over the past year and I’m happy that for the most part I stuck to my investing plan.  I don’t think I will regret any of those purchases over the long term.

In summary, 2013 looks like it was a year of adding great dividend growth companies to my portfolio.  Also on the positive, I wasn’t forced to sell any of my stocks which makes me very happy.

My Current Dividend Growth Portfolio

Another thing I like to do in my end of the year wrap up is review my current portfolio to see if any changes are necessary.  When reviewing my portfolio, I look for three things.

First, I want to make sure that every company in my portfolio increased their dividend payment to shareholders at some point during the year.  If a company did not raise their dividend, then I want to review the company to see if it may be time for us to part ways.

Next, I want to make sure that no company is trading at an excessively high valuation.  If I feel a company is trading at a excessively high valuation (30+ P/E) then I will probably consider selling the company.  When I sell a company because of high valuation, I will do so with the expectation that sometime in the future I will be able to buy the company back at a much lower more reasonable valuation.

12 31 13 Portfolio ReviewCheck out the picture to see all of my dividend growth holdings, their recent P/E ratios and their 2013 dividend growth rates.

I’m pleased when looking over my portfolio that every company increased their dividends in 2013.  Certainly some higher than others but all increased the dividend rate by at least an amount above inflation.  This makes things easy for me as I don’t have to worry about a company not growing its dividend.

I’m also pleased to see that no companies are valued excessively.  I don’t need to make any current selling decisions right now.

 

My Dividend Growth Investing Goals for 2014

So I’m pretty pleased with how my dividend growth investing went in 2013.  I beat the S&P 500 by over 4%, I made some great buys and all of my companies increased their dividend payments.  Taking everything into consideration, it was a great year for me.

Now it’s time to look ahead towards 2014 and set my goals.

Here are my goals for 2014:

  • In 2014, I want to contribute at least $4,000 towards my dividend growth portfolio.  Due to some medical issues, there have been some financial changes in my family.  This means I will be able to save less than we did the previous year.  However, I think $4,000 is a reasonable goal and hopefully achievable.
  • Beat the S&P 500.  Really I have no control over this goal.  The market will value my companies how it wants and hopefully my strategy performs well in the upcoming year.
  • Earn more passive dividend income in 2014 than in 2013.  As long as I’m following my strategy and my companies are growing their dividends, this goal should be easily reached.

There you have it.  Simple but effective goals.  The main thing I want to do is to continue to make forward progress.  Continue to purchase more high quality companies that increase their dividends over time.  Continue to earn passive dividend income.  Continue to evaluate and make good investing decisions.

If I can execute my strategy, 2014 should prove to be another great year!

How did you do in 2013?  What are your goals for 2014?  Good luck!

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22 Responses to 2013 Dividend Growth Portfolio Review

  1. Fast Weekly says:

    Good work Dan! It’s always good, though uncommon, when you can beat the S&P 500. I hope you do it again this year. I under performed the S&P by a wide margin, because I have been under invested. Oh well, if things had gone differently I would have been grateful to be under invested.

    I am sorry to hear of your medical/financial issues. I hope this is a better year. Cheers
    -Bryan

    • Dan Mac says:

      Thanks Fast Weekly, I was very pleased with my results this year. Of course, it wasn’t surprising because the class of stocks (large cap dividend payers) that I invest in really had a good year and drove the S&P forward. Hard telling what will happen in the next year but I have a feeling it won’t be near as great. As long as I stick to my investment plan long term, things should turn out very well over time.

      As far as the medical/financial issues, everything is going good. My househould will have a reduced income going forward due to some choices we had to make this past year (career choices). As we adjust, we will most likely be saving less but still saving so all is good.

      Good luck to you in 2014!

  2. Joe S says:

    It was a good year for my Roth IRA which holds dividend growth stocks (except for the great SAM)….my holding includes, MA, SBUX, DIS, PKG, GWW, COST, UNP, TROW, NKE, and SAM. This portfolio had a total return of 58% killing basically any market. I have always said that yield is the least important measure for me, quality companies with quality earnings and revenues are key.

    Regards,
    Joe

    • Dan Mac says:

      Congrats Joe those are phenomenal results for sure! It’s interesting that while we appear to have the same strategy (investing in dividend growth companies) our portfolios are completely different. Just goes to show there are many investment choices when going the dividend growth route and not everyones portfolio has to look exactly the same. Good job and good luck in 2014!

  3. A great portfolio although I noticed that you are heavily invested in tobacco stocks (3/19). I realize that its popular among dividend growth investors, but I am wary of the sector considering that it is under constant pressure from governments around the world for more taxation, lawsuits and interference.

    Wishing you and your family the best for 2014.

    regards

    • Dan Mac says:

      Thanks for the comment roadmap. I noticed that I am heavy in tobacco and possibly oil as well. I’m planning on doing a more thourough review of my portfolio diversification soon to see if there is anything I need to fix. Most likely, if I feel I am overweight in a particular area, I will try to fix with future purchases into other industries. Thanks again!

  4. Matt says:

    Nice work, Dan. I like the look of your portfolio – I’m currently in the portfolio-building phase of my investing life. I’m also looking at WFC for an addition to my dividend portfolio, so I appreciate your quick words here about the stock. My entry hurdle for dividend growth is 5 years so I’ll be doing some more research for sure. Thanks!

    • Dan Mac says:

      Thanks Matt, generally I try to stick within my dividend growth investing rules when building my portfolio. WFC didn’t fall within my own rules but I felt like taking a chance on them for the above stated reasons. Hopefully I won’t be disappointed!

  5. kolpin says:

    how do you go about calculating the total return for your portfolio? do you factor in incoming deposits of money, any withdrawals, and dividends into that number?

    I’m having a heck of a time figuring out my portfolio performance since I have a lot of cash transactions throughout the year which affect the final amount.

    • Dan Mac says:

      Hi Kolpin-

      I use Microsoft Excel to calculate my total return. Check out this site for an idea of how to do it in excel. Basically I track my cash additions to the account, any withdrawals (if there are any) and use my total account balance as my ending number. I calculate the total return of my entire account as I’m mostly invested and holding very little cash. If that site doesn’t help you, google how to calculate returns in Excel and there should be plenty of sites to help you figure it out.

      Thanks!

  6. Looks like a pretty solid year for you. My main goal is the dividend income and a secondary goal is to beat the market. I wouldn’t be worried about underperforming the market over the short term as it’s just too fickle. But if you keep beating the market by 4% then that won’t even be an issue. Best of luck in 2014 and hopefully the medical issues aren’t anything major.

    • Dan Mac says:

      Thanks JC. I would agree with you on not worrying if you underperform the market by a bit. However, it’s always nice to beat it. But really, I want to measure my success based on the long term so I really wouldn’t be concerned to underperform the market in anything shorter than 5 years.

      Of course, my main goal is also the dividend income. So as long as the companies I own keep paying me growing dividends, I’m a happy camper!

  7. Hey Dan!

    Good job on your investment returns! It has been an amazing year on the market for all investors (I hope!). My US portfolio has done 37.06% last year. I hope to beat the market for a third year in a row in 2014!

    Best of luck.

  8. Marvin says:

    Love your portfolio Dan, I own MO as well. I was gutsy enough to purchase it during the financial collapse and it has performed very well since. I would like to purchase a couple of the dividend growers that you have but would like to see a pullback before I pull the trigger.

    • Dan Mac says:

      Thanks Marvin, I’m pretty pleased with my portfolio so far. Definately don’t want to suggest that everything I own is currently a buy. Some companies could definately use a pull back before I pick up any more shares.

  9. Chris says:

    Dan, when you figure your portfolio growth, do you count the amount of money that you’ve put in, or subtract that out prior to calculating the growth?
    I’m just curious, because I believe I’ve been getting the “simple growth” of my portfolio which includes the monies I’ve added into the portfolio throughout the year.

    • Dan Mac says:

      Hi Rich, I use an excel spreadsheet which takes beginning value of the year, takes into account any money you contribute or pull out of the account through the year and then uses your end year balance to calculate. I’ll do an article with the formulas and stuff to demonstrate how I do this in Excel.

      So these returns are the actual real returns for the year. They include capital appreciation plus dividends earned to calculate the return on the portfolio.

  10. […] a flood of new goals. I’ve set my own for 2014, Passive Income Pursuit, W2R , FI Fighter, DGSI  all set out theirs as well. It’s always interesting to me to see how folks seek to […]

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