The Dividend Guy’s May Dividend Portfolio Review

The four most expensive words in the English language are, ‘This time it’s different. — Sir John Templeton. With oil prices inching higher and higher and the stock market blasting up during most of May, it becomes easy to forget about all the subprime mess, the high valuations of still many stocks, and the financial crisis the global financial system is still in. However, I am comforted by one thought that no matter what the media says, this time is not different and in time things will normalize and this period of time will be a blip in history. You can certainly accuse me of being too idealistic here, but I am comforted by the Callan Periodic Table of Investment Returns (click on image to open the pdf document from their site):

As this table shows, certain assets are going to perform differently during different years. The stock market moves up and down. Some sectors are out of favor when others are excelling. That is the way the stock market works and as investors we all need to get comfortable with this fact. Even though it is difficult at times, I continue to invest through these markets and think long-term, knowing that with my 25+ year time horizon the probabilities of my portfolio being higher are strong.

My own personal portfolio had not a bad month, as I continue to beat the S&P 500 based on year-to-date results. The financials and Pfizer continue to be a drain on my portfolio, however the consistent dividends from these companies is certainly helping with my overall returns. I am just waiting to see if Bank of America decides to cut its dividend or not.

I have started to include my vested employee stock option value in my portfolio as you will see below. This is something that I have just started to do for two reasons. The first is that this is the first time in a couple of years that my options have been in the money. The second, which is related, is that I view stock options as an overall part of my portfolio so they must be factored into my asset allocation. If these shares continue to be in the money and continue to rise, then keeping my Canadian holdings in line with my target allocation will be very difficult. I will need to act on bringing these value in line. Although I am not banking on it in any way, my plan for these stock options is to pay down my home mortgage so there is a possibility that in the future my overall portfolio value will take a hit, although my net worth will stay the same because of an action like this. I will cross that bridge when (if) I get there.

In addition, you will notice a couple of new holdings in my portfolio that have not been there before. In an effort to expand and diversify my stock holdings, and to diversify my stock selection methods I have initiated a small component of my portfolio into the “Magic Formula” process as written by Joel Greenblatt in The Little Book That Beats the Market. Although I hate the name of the strategy, over the next number of months I will be adding to this portfolio to build up a portfolio of stocks that meet the criteria. I am confident in this strategy over the long term based on Greenblatt’s research and the nice thing is that most stocks listed pay good dividends so the additional income from these stocks will be nice. You can read more about the strategy here. Keep in mind one of the key to this strategy is holding 20+ stocks.

With those updates in mind, here is a look at my portfolio, asset allocation, and sector allocation.

The Portfolio

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My Asset Allocation

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My Sector Allocation

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Note: Ooops – I just noticed the date on the portfolio chart – it should read May 23rd.