Year End Review of My Income Portfolio

As my site has progressed I have been working to develop on-line portfolios of the stocks I am interested in. In mid 2008 I went with a more active management of the portfolios and set up a tracking system to monitor the progress. My Income Portfolio went active on July 1, 2008 with a value of $20,000 divided equally between 10 dividend paying stocks or ETFs. All earned dividends are retained in the portfolio. The purpose of this article is to highlight what has happened with the portfolio over the last 6 months.

At the end of 2008 the portfolio was down 35% from its starting point. The only months with postive returns were July and August. December was basically break even. The total amount of dividends earned was $1,102.56, or 5.5% of the starting value.

The worst performing stocks still in the portfolio were Atlas Pipeline Partners (APL) whose stock has shed 80% of its value and Ship Finance Ltd (SFL) down 50%. APL is under a big cloud of low energy prices and debt. At this point I have no clue to what level APL will be forced to cut its distribution, but think there is upside in the company, especially if it ends up combined with Atlas Pipeline Holdings (AHD), the general partner. Ship Finance has increased its dividends each in the last 2 quarters, but that did not stop the market from hammering the stock price along with the entire shipping sector.

The only stock in the portfolio with a positive stock price was Monmouth Real Estate Investment Corp. (MNRTA) which is up 9% for the 6 months. This quiet little REIT has been surprising in its steadiness. CVY (see below) was up 7% for the single month it was in the portfolio.

Two stocks were removed from the portfolio. City Bank (CTBK) was sold out at a 50% gain when the market got all excited about stocks in September. I did not believe it could maintain its dividend and it has been proven true. Penn West Energy (PWE) was sold out of the portfolio at the end of November at a 50% loss (not including dividends). Falling energy prices and Canadian dollar did not give me much hope for this company.

The Claymore/Zacks Yield Hog ETF (CVY) was added the 1st of December. I thought this would be a more conservative way than individual stocks to put some cash to work.

At this point the portfolio has nine holdings. I am pretty confident about all of them except APL, but believe the chances of a positive surprise are greater than the chances of a negative one. With the current average yield of the portfolio near 20% I think there is a lot of upside for the stock prices and in the meantime will just be collecting dividends into the cash holding. As of 12/31 there is $422.84 cash in the portfolio.

Note: This Income Portfolio is hypothetical and does not 100% reflect my personal holdings. The discussion and data on the portfolios are for informational purposes only and are not meant to be investment or trading advice.

Comments

[george9:]

apl up 39pc friday. do not despairit was a great pick.
shippings a wrong way bet until there is a turn around.
george oram berk ca jan 3

Jan 04 11:23 AM

[henarl:]

You would have done better if you had been selling covered calls on your positions. This works very well in a highly volatile down market like the last half of 2008.

Jan 04 03:15 PM

[richandmer:]

I am trying to figure out the purpose of your income fund? Is it to find out the results of picking some of worst dividend paying stocks (high yield).

If that is the case, why not just go back to 12/31 of every year and pick out the highest yielding stocks from a variety of industries and then looking at the results every year going forward.

I have read many of your articles and it seems that you are not doing that well. Is it time to change your investment philosophies?

Jan 04 05:29 PM

[Old Trader:]

Do you give any thought/consideration to your portfolio construction? Even staying within the parameters of high yield/income, there're numerous options to diversify across sectors and economies, esp. given last year's sell-off which offered up many quality firms that now generate attractive dividend yields (firms not typically noted as high yield stocks).

Fwiw, my actual (real money) portfolio was down 9.59% for 08 (including reinvested dividends), and yields 12.5%. Presently 14 positions (including cash), which is 4-6 positions short of where I would prefer to be.

Jan 04 09:45 PM

[irondoor91:]

I see that all the smart guys are now posting their unprovable results. Most would have bailed on a real-money portfolio in October.

Jan 04 11:39 PM

[You're Kidding:]

old trader said:

Fwiw, my actual (real money) portfolio was down 9.59% for 08 (including reinvested dividends), and yields 12.5%.

Really? That's great. How about sharing your tickers?

Jan 05 05:34 AM

[Tim Plaehn:]

Richandmer,
The portfolios and posts on my blog are a learning process for me. SA is kind enough to reprint my thoughts here. The Income Portfolio has performed similar to the overall market. Its biggest downfall was an over reliance on energy stocks. I put the portfolio into an actively manage mode for the 2nd half of 2008, so absorbed all of the bad news for that period.

I have found I tend to stock with a stock too long when the news is bad. I am pretty comfortable with where the stocks in the portfolio are now and they have performed well for the first few days of the new year. Check back to my site in a few months and see how things are going.

Jan 05 01:36 PM

[silverwood:]

Tim, good article. IMO selling PWE was a mistake. Looking a PWE stock price at the end of November, PWE was trading around $14 it did dip lower so if you bought it back cheaper good move. But now the day I type this, oil and Canroys are ralling and PWE is trading for $13.50. You've will miss January's distribution and looks like the stock price will be higher than your sell price very soon.

Jan 06 02:18 PM

[ozzy:]

If you check apl's financials, at the schwab site, they are showing them to have around 4.00/share in cash for the first quarter. This is about the same as their yearly distribution, which indicates to me that they will be able to make their distribution for the year and have 3 quarters worth of cash to pay other obligations. I think we will see this stock continue to climb for awhile. Looks way over sold to me

Jan 08 02:00 PM

[Gregorian:]

Well, your portfolio'd have been a nice starting point NOW, eh? You get the same quality stocks with skyhigh dividend yields... Since it's mostly a paper portfolio, you don't take any actual loss..
Like your investing philosophy, but started at a bad point.

Jan 12 07:00 PM

[RWRocksOn:]

The Atlas MLP's are down hard due to concern about violation of APL's debt covenants, not just concern about the distribution (not dividend, by the way) dropping. I so also feel that the market has oversold APL/AHD.

Jan 18 10:28 PM

[jimmy46:]

2 March
SFL is down 28% today, I don't see any news,
what's happening?
thanks
james

Mar 02 03:35 PM

[jimmy46:]

3 MARCH

Mar 03 01:43 PM

[jimmy46:]

3 MARCH

DOWN another 18% this morning,

do you get a notice when someone posts to a blog of yours?

Mar 03 01:44 PM