2006 Results for The Dividend Guy
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It is that time of year where all investors need to take stock of how they did in their portfolios to decide if they achieved the results they were after.
My first goal is to beat the S&P/TSX Composite Index on an annual basis. For those of you in the U.S., the TSX is the name for our stock market up here. My second goal is to increase the amount of dividends my account throws off.
1. Did I Beat the Index?
The S&P/TSX Composite had a YTD return in 2006 of 14.5%. My return during the 2006 period was 13.2% – a difference of 1.3%. In other words I did not meet my goal. The reason for this difference I believe is that I was underweight in the energy stocks through most of the year. Oil and gas stocks, which make up a pick chunk of the TSX, had an amazing run for most of the year, even after dropping back in the last few months of the year. My only exposure to energy was through Talisman Energy, my Epcor income trust (which got killed as a result of the change in tax legislation), as well as a bit in the funds my pension plan holds. I think I could have been more aggressive on finding another energy stock such as Enbridge or Suncor, but I was never comfortable given the new heights these stocks were making. I like my allocation and will continue in 2007 to keep in consistent.
2. Did My Dividend Payments Increase
Yes they did. At the end of 2005, my portfolio was earning $819 per year in dividends. As of December 30, 2006, my portfolio is now earning $1,106 per year in dividends – a 35% increase. If I can continue doing this for years to come I will be in a good place when I retire.
2007 Goals
Looking forward to 2007 I want to keep these goals the same – to beat the TSX index and continue to increase the amount of dividends my accounts throw off. I will be looking at other strategies to produce income from my portfolio such as writing covered calls, but only when I am ready.
4 Comments on this post
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yielder said:
Do you care about beating the index or do you care about beating inflation? If you are looking for “Passive Income Through Dividend Investing”, your focus is on income from dividends not market growth. If your focus is on dividends, you care about dividend growth.
Looking at what you own, I’d say that you beat inflation handily although it would be interesting to see a weighted dividend growth figure.
All the best in the New Year,
MikeDecember 31st, 2006 at 3:58 am -
Tim said:
Nice job. I think your strategy of growing your dividends will pay off nicely. I don’t find it surprising you lagged a bit for a strong up year for the market. You should really out perform in flat or down years.
January 2nd, 2007 at 3:54 pm -
pfstock said:
I’m going to make two predictions and one assumption. The assumption is that you will almost certainly achieve goal #2. Dividend paying companies are under great pressure from their shareholders to increase dividends or at the very least not decrease them even during an economic downturn. And since you are probably reinvesting your dividends, you will have an increasing number of shares on which to collect dividends. These two facts make it a virtual guarantee that you will achieve your goal of increasing your dividend payments, unless you sell your dividend paying stocks.
Prediction #1: 2007 will be like 2003. In 2003, the “Stock Market” increased by 26%. Suppose that in 2007 the stock market goes up 26%, but your return is only 21%. Then you would be writing a post very similar to this one stating that you didn’t meet your goal, and you’d be looking for reasons why.
Prediction #2: 2007 will be like 2002. In 2002, the stock market decreased by 23%. Suppose this happens again in 2007, but your portfolio loss is only 18%. Then you would be writing a post stating that you achieved both of your goals. Although both the index and your portfolio went down, you’d be able to congratulate yourself because you didn’t lose as much as if you had invested in “the Index”.
Which scenario would you rather have? One has to be careful when setting goals; I, personally, would not consider scenario #2 to be satisfactory, even though the stated goals have been met.
Note: “Stock Market” = annual U.S. S&P500 return excluding dividends.
January 26th, 2007 at 7:14 pm
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