Year in Review: Dividends Rock!!

Written by The Dividend Guy on January 2, 2006

As I do every year, I like to tabulate the results of my investment activities to arrive at a clear picture of my performance. This post will be walk-through of that analysis.

Two main things changed this year that have affected my investments. These have been important, and positive changes in my investing world. The two changes are as follows:

1. I changed jobs

I went from a pretty basic Pension Plan and Employee Stock Purchase Program to a really good one. The employer match at my old company was 2% for my 3%. At my new company, the match is 4% for my 2%. There is also no vesting schedule with the new plan. I lost out on about $2000 because of the switch due to the employer portion of my prior plan not vesting yet. However, I will be able to easily make up for this as I have an additional 1% of my earnings going to my pension and 1% less of that is my own money.

The real awesome part is the Employee Stock Purchase Plan. Under my old employer, I contributed 5% of my earning to company stock which the company “allowed” we to purchase at a 15% discount. Pretty weak IMHO. In this new plan, I contribute 5% to the savings plan which buys stock. The company matches dollar for dollar (5% in my case) and I can direct that to my benefit plan (medial, dental, insurance, etc). I have chosen to direct all of this “match” to additional savings. Basically, it is an additional 5% that the company is paying me to invest. I like it!!

2. Started Blogging About It

As a bazillion other blogs have done, I started blogging about my personal experiences. In my case it is in relation to my investment accounts - more specifically my usage of dividends in my investment plan. I like doing this - it has been a good way to learn about investing and myself

So, onto my results. When I evaluate my performance I compare myself to the performance of the broader market. If I can’t beat the market, then I would be better off by buying an index fund and just letting the money grow that way. This year I blew the market away. According to Microsoft Money, my Total Return for this year was 16.8%. Compare that to the S&P 500’s return for this year of 3% and the Dow’s loss of 0.61% and I more than beat the benchmark.

These strong results came from a couple of areas, but I have to give a huge shout out to the Royal Bank of Canada who gave me a 43.5% Total Return. My other strong stocks included IGM Financial, my International Index Fund, and my REIT Index Fund.

My weakest returns were almost all US based stocks. Merck hurt bad as did Coke and Citigroup. This is indicative of the Dow returns I referenced earlier. I still believe in these stocks so I am holding tight, but I will be watching closely.

I am now earning around $818 per year in dividends - about a 2.27% yield.

My asset allocation is a bit out of line - I will be making some moves to fix that over the next year.

I think it is super important for an investor to learn from past experiences. That being said, here is what I want to do a little bit differently this year.

1. Nudge that dividend yield up a bit higher - my current yield on my account is 2.27%. I would like to see this between 3 - 4 %.
2. Get my asset allocation more in line with my plans - I think I am at risk a bit here.
3. Add more money to my investments - always easier said than done!!

Thanks it for now…by the time this is posted I should have also updated My Portfolio. Check it out and comment at will!!


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5 Comments so far

  1. Canadian Capitalist January 3, 2006 9:59 am

    Congratulations on a good return for the year!

    I have a bit of nitpicking with your benchmark though :) You have 43% in Canadian Equities and the TSX returned 23% in 2005. So, the difference in returns may not be as high as you think. But even a 1-2% outperformance over the long term will do wonders for your portfolio.

  2. Anonymous January 3, 2006 1:08 pm

    I was going to say the exact same thing as the Canadian Capitalist. The TSX rocked this year at just about 22% on the year.

    You need to compare apples to apples. Separate your US and Canadian equities and compare them against their own indexes. I think there may be “blended” indexes as well that you can use to compare with.

  3. The Dividend Guy January 3, 2006 9:10 pm

    Can’t let me glout even one bit eh!!! Seriously though, that is a good point about ensuring that I track to the correct index. However, I tend to look at my portfolio from an overall perspective and not seperate “buckets” of assets. That being said, I think I should start to look at it independently as if I can’t beat the market in any one of the asset areas I would be better off buying an index fund!

  4. Michael Patzer January 3, 2006 10:23 pm

    Hey, great job! I wish I hadn’t been so heavily invested in the US this year. I was doing an interesting calculation the other day that reminded me of your website. I thought if I wanted to split my dividends by taking 25% as income and reinvested 75%, and had an average dividend yield of 4% and wanted a $100,000/yr passive income, I would have to own $10 million in stock. Plus there is appreciation, dividend increases, and the reinvested, so your income should increase each year. Quite a big goal, but I thought it was interesting. Have you thought of these things? I was wondering why your goal is $300,000? Is it something you arrived at by a similar calculation?

  5. Derek January 17, 2006 5:06 pm

    I did a similar sort of analysis a while back looking for Canadian stocks for dividend growth. Anyone who’d like to see the screens I ran, see my website.

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