Bert’s Portfolio Review and Assessment

2014 has been a CRAZY year for my portfolio, Lanny’s portfolio, and many other participants in this great community.  For many of us, we have pushed ourselves to the limit and infused as much capital as possible into our portfolios to get the dividend growth snowball running.  After all, as dividend growth investors, we know the power of dividend reinvesting and all the benefits, so stretching ourselves to invest as much as possible early just makes sense.  Before we begin 2015, I wanted to take some time to perform a portfolio review to assess the current state of my portfolio and perform some quick tests to see what tweaks my portfolio may need in 2015 or what areas I should be focusing on with my next round of capital deployment.   With that being said, let’s peel back the layers my portfolio and dive in!

Quick 2014 Statistics

  1. Market Value*: $47,997
  2. Total Dollar Value of Stock Purchased*: $12,603
  3. 401(k) Contributions: $2,636
  4. Projected Annual Dividend Income*: $1,911
  5. Actual Dividends Received*: $2,216

*As of 12/29/14 close

Man, I purchased a lot of stock in 2014.  When factoring in my 401(k) contributions from each paycheck, my portfolio’s cost basis increased over $15,000, or 57%!  WOW is all I can say to that.  I can’t believe I increased my portfolio by so much this year.  As I gather my thoughts, I know increasing by over 50% is not sustainable in the long run, but I tried to get the snowball rolling as fast as possible this year.  If I were to extrapolate my average portfolio yield over my  purchases this year, the combined contributions alone added over $614 in projected dividend income to my portfolio.  The crazy part is that this does not even factor in projected income on re-invested dividends or the impact of dividend increases that were announced subsequent to purchases.  Surely, this $614 figures has grown since each purchase date.  This is why I LOVE dividend reinvesting.    One other quick item, the $2,215 consists of both dividends received  and reinvested capital gains distributions from mutual funds.   Since I selected the DRIP option for both, I classified both types of distributions as dividends received in 2014.  Do you account for capital gains distributions in a different manner?

Portfolio Review

As I purchased stock, I tried to take a strategic approach to adding positions.   I would frequently ask myself questions such as: Am I missing an industry in my portfolio?  What stocks are discounted?  Should I diversify within the industry?  Do I want to add a stock with a minimum dividend yield in my portfolio?  Somehow, someway, there was a method to my madness and each stock was purchased for a valid reason.   As the dust settles and we begin a new year, I wanted to take some time and ask myself a few critical questions about my portfolio to see where I should be focusing in 2015.   I will use the remainder of the article to ask myself questions about the current state of my portfolio and assess whether a change needs to be made going forward.  For each of these, please leave comments on your thoughts about my portfolio and if YOU think I missed something in my assessment of each question.

Question 1:  What is my portfolio’s weighted average dividend growth rate?

Recently, Lanny introduced this metric in a recent article and I thought it was time to assess my portfolio’s weighted average growth rate.  I want to use this metric as a supplemental tool to our traditional dividend stock screener going forward to ensure that my stock purchase will not reduce both my average yield and my weighted average dividend growth rate.   The one thing I have learned since I entered this community earlier this year is that dividend stocks come in all shapes and sizes.  You have your high dividend yield/low annual growth class, your average yield/average growth class, and your low dividend yield, high annual dividend growth class.  In past investments, stock analyses, and watch lists, I have reviewed a stocks yield and growth rate on an annual basis.  But besides for comparing the statistics against competitors in the industry, I never took the analysis a step further and assessed how this new stock would fit into my portfolio.  Would the stock increase/decrease my dividend yield and weighted average growth rate.  If the answer to both is no, then why am I adding this stock to my portfolio?  It is hard to answer these kind of questions if you do not know, right?  Well that changes now!

Answer: 7.54%

My take: My portfolio’s current dividend yield is ~4.03% and my portfolio has a weighted average dividend growth rate of 7.54%.    Going forward, I am going to try to find stocks that will improve either one or both of these metrics going forward.  In hindsight, my purchases improved both ratios as IBM has a dividend yield of 2.71% with a dividend growth grate of 14.86% and Canadian Imperial has a dividend yield of 4.17% with a dividend growth rate of 3.68%.  This won’t be the final decision maker over a purchase, as there are some great stocks such as PG that would not improve either ratio in my current portfolio.  However, I plan on using these two figures as a rule of thumb in the future.  I am sure as my portfolio matures and I continue to purchase more stocks, my overall yield will decline and my growth rate will increase.  So, the rule of thumb will only get better going forward.  Just for fun, I took a quick look at my December Watch List to see just how many companies satisfied this new rule of thumb.  Great news for me, all the companies on the list (IBM, CM, CVX, and SLB) would have improved my portfolio’s yield and/or average dividend growth rate.  Looks like I have been focusing on this without even realizing it!

Question 2: Does any one industry account for too much of my portfolio’s dividend income?

For this question, I will look at the total dividend income received from each industry (oil/gas,  financial, REITs, etc.) to determine if I am too exposed to an industry.  Two recent events have caused me to ask myself this questions, both of which could potentially impact several holdings ability to continue to grow their dividend in the short-term.  First, interest rates are destined to increase and, as I am sure we all know, REITs may have exposure to rising interest rates as their cost of borrowing will increase.  If less cash is available due to an increased cost of borrowing, there will be less cash available to distribute to shareholders.  Second, who knows the true impact of crude oil’s free fall over the last month yet.  I have heard some places say profits will fall, others say companies will be able to weather the storm, and some who cannot predict the impact.   The reason I said “yet” in one of the preceding sentences is that none of the major oil companies have filed their 10-K or 10-Q since the price plummeted, which will provide a very clear picture of the situation.  If profits and future cash flow from cancelled projects decline significantly, companies with high payout ratios may be forced to take action to preserve cash or companies with moderate payout ratios (Chevron) may slow their dividend growth rate to preserve their cash.  This 10-K/10-Q season will be a fascinating storyline to watch over the next couple of months for this very reason.  December has been filled with speculation for good reason, but we will know the facts soon enough.

So for this question, I will review each industry’s dividend income weight in my portfolio using the industry classification per Morningstar.  For this analysis, I will consider an industry “out of weight” if the allocation is greater than 20%.   So let’s take a look at the results of this analysis! The table below includes the top three industry weights of my portfolio (Note: I only included the industry weights that accounted for >10% of my projected dividend income).  Lets hear your thoughts on this…is it time for a change?

Portfolio Review - Weights

Answer: No, I do not believe a change is necessary.

My Take: The only industry classification with an industry allocation over 20% is mutual funds, and the 23.22% is actually diversified across all industries due to the nature of the investments.    For this reason, I am ruling that this sector is not truly out of weight.   My second closest sector is Oil and Gas, which includes investments in major integrated oil players and Kinder Morgan.  While 15.85% may appear hefty, the diversification among the sub-categories gives me comfort in my current position.  With only 11% exposure to major integrated oil, I would also be comfortable purchasing a company such as Chevron/Total/etc. to take advantage of the beaten down oil prices.  There is enough of a cushion that an investment in such a company would not throw the sector out of weight.  While the weight may spike in the short-term after the hypothetical future purchase, it would surely decline as I purchase stock in other industries.   This is eye-opening  to me because being over-weight in oil was always on my mind and I considered it a major “con” as I researched potential opportunities over the last month.  With the facts that came to light today, it is time to remove this roadblock and bring back all major oil companies to the table as potential investment opportunities.   I guess I asked myself a very constructive question!  One quick note about my REIT weight.  This allocation will decline soon as I am winding down my investment in ARCP.   There will be more to come on this story when the sale is final, so I will leave you in suspense for now!  Again, please let me know your thoughts on this matter!

Question 3:  What industries am I missing from my portfolio and what industries have too low of an allocation?

This is a question all investors with a goal of building a diversified portfolio should ask themselves on a continuing basis.   Throughout the year, I was open about the fact that my portfolio was lacking a presence in the financial industry (as BAC was my lone soldier).   As the year progressed, I would keep an eye on banks and insurance companies for an opportunity to increase my presence in the sector.  I addressed this need through purchases of Aflac and Canadian Imperial.  Now, 5.27% of my portfolio’s market value is allocated to the financial sector.  Not great, but it beats my <1% allocation at the beginning of the year.  The moral of this story is that it is important to understand which industries are lacking in your portfolio so you can perform research, identify potential fits, and pounce on opportunities as they arise.   For this question, I will take a look at my portfolio to identify all industries that represent <5% of my current market value.   In addition (and yes, I am asking for the readers help on this question), I will also list industries that I believe are lacking and a few potential dividend growth companies that could satisfy the need (Note: The list will not be based on whether the company currently passes the Diplomats Stock Screener.  It is just a brainstorming session).  Drumroll please……

Portfolio Review - Industry Weight

My Take: Wow.  It appears that I have a lot more industries that have portfolio weights of <5%.  When thinking about it, this actually makes a lot of sense since all the stocks listed in the table (excluding T) are entry-level positions that I plan on re-upping in the future.  For now, since I am still building a portfolio and some of my purchases have been small (<$1,000), I will have to live with the results.  But I am sure this will change as I continue to add positions in the upcoming year, especially since many of the industries have great dividend paying stocks that are not in my portfolio.  For example, the telecom industry has VZ, the tobacco industry has MO/BTI/LO, the beverage industry has KO/PEP (though these two are much more than beverages), and so on.  All of those companies would look great in a dividend growth portfolio and I would love to have them in mine!  Here are some industries that are absent from my portfolio and a few potential investments in each industry:  Railroads (UNP, CNI, CSX, NSC),  Freight (UPS, FDX), Metals and Minerals (BBL- A very hot dividend stock right now, just ask Lanny!), and Gas Utilities (NGG).    While this does not include all industries that are absent from my portfolio, it is a great starting place and provides a list of great stocks to potentially add in 2015!  What industries do you think I am missing and what stocks would you consider from that industry?


As I mentioned at the beginning of the article, 2014 has been an insane year for my portfolio.  Many aspects of my life have been crazy and hectic, and unfortunately they usually haven’t been for great reasons.  But the insanity that my portfolio brought me was unique compared to others in the past, because I know that the foundation I am laying now will provide my family and me prosperity in the future.  All the insanity of sudden drops in the market, the chaos of watching one of your stocks plummet, and the countless hours spent rushing to find the perfect investment have helped me grow as an investor and a person.  Lanny and I always joke around about how investing is addicting because once you purchase one stock you immediately begin looking ahead to the next several purchases, and it couldn’t be more true.  I now find myself trying to save at every corner so that I can tack on another $100 to my next purchase.  That alone adds $4 to the coveted projected dividend income!  While this insanity and addiction have led to record-breaking growth in my portfolio, the current state of my portfolio is far from perfect.  Through my review today, I now have a sense of direction of where I would like to take my portfolio next year while accomplishing all of my 2015 investing goals.  In this next year, I will continue to add positions to my portfolio, but this time I will focus on stocks that will improve my dividend yield and/or my dividend growth rate.  I have a lot of industries to choose from, as my portfolio consists of many small investments in industries, so I am not limited from that aspect.

Thank you all for your support this year.  I could not have done it without you.  Please let me know if you have any tips, suggestions, or advice you could add as a response to my three questions.  Lanny,  I would love it if you wanted to chime in as well!  The more, the merrier.

Have a Happy and Healthy New Year Everyone! Let’s keep the momentum going in 2015 and take another gigantic leap forward to financial freedom.


12 thoughts on “Bert’s Portfolio Review and Assessment

    • Thanks Tawcan! You had a great year as well. 2014 was a great year for many people in the community. It seems that we all pushed ourselves to invest as much as possible, and our portfolios summaries reflect that.

      As always, thanks for stopping by!


  1. Wow man, you’ve had such a good year! Congratulations on taking things up a few levels. I can’t even imagine where you’re gonna be at the end of 2015, if you carry on at this rate!

    If you want a bit of inspiration for sector weighting (and some awesome spreadsheets), check out Dividend Life’s website. He has some really good graphs and sheets that covert Peery much everything.

    Here’s to a fantastic 2015!


    • M,

      Thank you very much for the kind words. I must say, being around Lanny and working with him has aided a lot in turning the investing up a notch. It is great to work with someone that you can bounce ideas off of and have a friendly competition with. 2015 should be a great year for all of us. I am hopefully unlocking new sources of income this year that will allow me to continue to grow my portfolio at this rate. It’ll be tough, but a very fun journey!

      Thanks for sending the link to Dividend Life’s website. I have found a lot of information on his website helpful in the past.

      Cheers to a great 2015 for you as well!


  2. Bert,

    Great job with the portfolio this year!!

    Keep investing that fresh capital and good things will happen. Putting away that much capital is a dream for most people. You’re in a wonderful position. 🙂

    Happy New Year!

    Best wishes.

    • DM,

      Thank you very much. I appreciate the kind words. At the end of the day, I know that the more capital I put in now the better. While I wish I could place more into the market, I can’t complain about the fortunate position I am currently in.

      Have a Happy New Year as well. Best of luck to you in 2015! I am sure I’ll be following along.


  3. Wow what a great year. And an impressive amount added to your portfolio.
    Keep up the good work!
    The avgerage div gowth rate, is this the one year rate? And you used a weigthed averaged?
    Your questions are real good and i will try to answer them for my portfolio.

  4. Congrats on a great year, Bert. Good overview and I like where you are headed. Some great stocks on your watchlist and yes, the diversification will come as the portfolio evolves. A while ago, I was too concerned about the diversification and realized that its ok to be a bit unbalanced if it means you are picking up quality names at discount prices. Right now, energy is my largest holding and I dont mind buying more energy names if it means I get them at a good price.

    Best wishes to you (and Lanny) for 2015.

    • R2R,

      Thank you very much for the kind words. I am starting to realize that it is okay to be out of balance in the short term so you can take advantage of all opportunities as they arise. I can see myself adding several new industries this year or re-upping in one-stock industries, which will increase the diversification. For now, I might stick with assessing my diversification once annually to avoid micro-managing this aspect of my portfolio.

      Thanks again for stopping by. Best of wishes to you as well.


Leave a Reply

Your email address will not be published. Required fields are marked *