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Introduction

I started writing about my investment portfolio back in September 2013. I started writing after I had sold all my old "stagnant" mutual funds and put the funds to use in my new and improved income portfolio. I've been investing for years and have always treated my investment and personal finance like a business. It was time to consolidate all my investments and put a good plan with established goals in place for those investments. That is what prompted the mass changes in our investments.

I want my reporting period for my investments to be inline with the same timeline I use for a variety of other metrics to determine how successful the previous year was. In this article, I'll talk about my investment portfolio, finances and many other metrics I follow to show how successful 2013 was and look forward to 2014 and establish goals and show where I would like to go in 2014.

Dividend and Income Composition for 2013

The first thing I do is to look at the breakdown of my annual dividends. The goal is to diversify the dividends and have the dividends not concentrated too much in only a few companies.

Here is what 2012 looked like:

  • Total Dividends (annual): $3,409

Top 3 Contributors:

  • USAA High Income Fund 26.16%
  • MFS Total Return B Fund 16.72%
  • CD Ladder 8.23%

Total of annual dividends: 51.11%

Here is what 2013 looked like:

  • Total Dividends (annual): $16,484

Top 3 Contributors:

  • UBS ETRACS Monthly Pay 2x Leveraged Mortgage REIT (NYSEARCA:MORL) 16.97%
  • American Capital Mortgage Investment Corp (NASDAQ:MTGE) 14.81%
  • American Capital Agency Corp (NASDAQ:AGNC) 9.32%

Total of annual dividends: 41.10%

Total Dividends went up from 2012 to 2013. The top 3 contributors made up only 41% of dividends in 2013 compared to 51% in 2012. The one downfall for 2013 is the top 3 contributors were all mREITs. I'm ok with this for now though because I'm working on building some other positions up to a full position so that will further dilute mREIT dividends. Also, even with the mREITs rounding out the top 3 positions they make up only 41%, still down from the previous year.

Next, I'll look at my income in 2013 compared to 2012. My total income increased an astounding 43%. I added a new line I'm measuring which is budgeted income. I have for years not budgeted all my income. Some of the income that is not budgeted, and therefore, spent for example is dividends reinvested and other income that is reinvested and never really realized. There is no comparison therefore for budgeted income. I'll compare budgeted income in future years when I have more data points.

My income from my main job went up 8.6% in 2013, my income from dividends went up 376% due to the rolling over from my old portfolio to the new portfolio, rental income went up 3194% due to the addition of another rental property and the previous rental property was in service for the full year instead of only a few months. All these combined add up to that 43% overall increase.

Here is the comparison of the composition of my income from 2012 to 2013.

Here is 2012:

  • Main job: 95% of total income
  • Dividends: 4% of total income
  • Rentals: 1% of total income

Here is 2013:

  • Main job: 72% of total income
  • Dividends: 12% of total income
  • Rentals: 16% of total income

From an income perspective, 2013 was a fantastic year as well. Income went up across the board and the composition improved. The goal is for dividends and rentals to increasingly make up more and more of my income to the point where I can quit my day job. In 2014 I expect total income to go down a little mainly driven by my career change and most likely a pay cut. This pay cut will be partially offset by an increase in dividends and a slight increase in rental income. In 2015, I expect to purchase another rental and this should help return me to income growth in 2015.

2013 Goals

There are three big things I measure every year and keep track of on a monthly basis so I can adjust my savings to ensure we meet the goals. First, I track dividends/interest from all sources. In 2013 my dividend goal was $13.65/daily by the end of the year. I blew that away with $45.79/daily. This caused me around October to raise my dividend goals for future years. I set my dividend goal in 2014 for $35. By November as I was continuing to utilize the funds from the old portfolio and put them into the new portfolio I blew past my 2014 target. I've decided to not yet change my 2014 target. I'll raise that if need be half way through this year if I'm convinced I'll beat it without looking back. I believe goals should be realistic, attainable, but challenging as well. I'll re-evaluate later this year.

The second goal I track is total assets. My 2013 goal was $490k. I blew past this as well as I have been the last few years and I sat at $765k at the end of 2013. I increased my 2014 goal to $700k which obviously is still below where I am at but I'll re-evaluate that later this year as well. For now I'm already beating both my dividend and total asset goals for 2014.

The last big goal I track is net worth. My net worth goal for 2013 was $353k. I sat comfortably at $358k at the end of 2013. This was barely a beat but a beat nonetheless. My goal for 2014 is $435k. Since this is the only goal I haven't beaten already a close eye will be kept on this.

2013 Investment Portfolio (as of 20 Dec.)

Company

#

Value

YOC

Weighted Goal

Dividends*

ConocoPhillips (NYSE:COP)

78

$5,450.64

4.30%

$5,000.00

$18.00

Kinder Morgan Energy Partners (NYSE:KMP)

129

$10,224.54

6.58%

$10,000.00

$58.20

Vanguard Natural Resources LLC (NASDAQ:VNR)

210

$6,037.50

9.21%

$10,000.00

$43.50

General Electric (NYSE:GE)

50

$1,368.00

3.99%

$5,000.00

$3.60

3M (NYSE:MMM)

13

$1,777.36

2.27%

$5,000.00

$2.70

Coca-Cola (NYSE:KO)

100

$4,004.00

2.87%

$5,000.00

$9.30

Philip Morris (NYSE:PM)

102

$8,723.04

4.30%

$5,000.00

$32.10

Procter & Gamble (NYSE:PG)

51

$4,173.84

3.07%

$5,000.00

$10.20

Leggett & Platt Inc. (NYSE:LEG)

30

$916.50

4.09%

$5,000.00

$3.00

Triangle Capital (NYSE:TCAP)

270

$7,492.50

7.76%

$10,000.00

$48.60

Wells Fargo (NYSE:WFC)

240

$10,790.40

3.00%

$5,000.00

$24.00

MTGE

872

$15,870.40

14.72%

$15,000.00

$203.40

Annaly Capital Management, Inc (NYSE:NLY)

935

$9,443.50

11.90%

$10,000.00

$109.20

AGNC

480

$9,537.60

13.74%

$10,000.00

$128.10

Dynex Capital Inc (NYSE:DX)

1000

$8,340.00

12.49%

$15,000.00

$90.00

Realty Income Corp (NYSE:O)

255

$9,598.20

5.30%

$10,000.00

$46.50

MORL

670

$12,341.40

23.39%

$10,000.00

$233.10

HCP, Inc (NYSE:HCP)

300

$10,824.00

5.37%

$10,000.00

$52.50

Healthcare REIT, Inc (NYSE:HCN)

162

$8,603.82

4.99%

$10,000.00

$41.40

Johnson & Johnson (NYSE:JNJ)

46

$4,236.14

2.99%

$5,000.00

$10.20

Illinois Tool Works (NYSE:ITW)

15

$1,228.05

2.42%

$5,000.00

$2.10

Target Corporation (NYSE:TGT)

75

$4,686.75

2.70%

$5,000.00

$10.80

Textainer Group Holdings Limited (NYSE:TGH)

60

$2,373.00

5.36%

$5,000.00

$9.30

McDonald's Corporation (NYSE:MCD)

10

$965.10

3.40%

$5,000.00

$2.70

StoneMor Partners (NYSE:STON)

225

$5,636.25

9.83%

$10,000.00

$45.00

Emerson Electric Co (NYSE:EMR)

20

$1,386.80

3.07%

$5,000.00

$3.00

NTT DoCoMo, Inc (NYSE:DCM)

130

$2,122.90

1.91%

$5,000.00

$6.60

Apple (NASDAQ:AAPL)

8

$4,392.16

3.00%

$5,000.00

$8.10

AT&T Inc (NYSE:T)

90

$3,087.00

5.34%

$5,000.00

$13.50

American State Water Co (NYSE:AWR)

125

$3,713.75

2.94%

$5,000.00

$8.40

UBS ETRACS 2X Leveraged Long Wells Fargo Business Development Company ETN (NYSEARCA:BDCL)

75

$2,202.00

14.06%

$5,000.00

$25.20

AmeriGas Partners LP (NYSE:APU)

123

$5,531.31

7.60%

$10,000.00

$34.50

Total

$187,078.45

8.31%

$235,000.00

$1,336.80

*monthly

Portfolio Performance

If you'd like to view the initial composition you can look here. First, monthly dividend income went from $511.80 to $1,336.80 which is an increase of 161% since starting the portfolio. Current Yield has gone from 6.95% to 8.57% to beat my goal of 8%. Yield on Cost has gone from 6.88% to 8.31% to fall short of my goal of 9%. I expect I should be able to reach my 9% YOC goal by the end of 2014. This will continue to increase as most of my positions increase their dividends. The beta of the portfolio is maintaining stable at 0.67 below my goal of 0.75. I will continue watching these metrics especially as I'm making additional investments down the road to try and improve them. Yield on Cost will take longer as we need to wait for the consistent year over year dividend increases that roughly 50% to 60% of my portfolio should do.

Conclusion

From this point on I will update my portfolio every three months. I've been a little sporadic about updating it the last six months because I've been making huge investments and wanted to share the progress updates. I wanted to do an update now to establish this as the beginning of my reporting year to stay on a normal cycle down the road. I expect near the end of this year I'll be adding my 401k to this portfolio as I roll that over into my IRAs and as I'm changing careers.

2013 has been a great year for our investments and finances and I look forward to great strides being made in 2014 as well. I'll continue to post updates on my portfolio every 3 months. I'll do my year end review next year at this time as well. I hope everyone has a good and successful investing year!

Disclosure: I am long AAPL, DX, AGNC, APU, AWR, BDCL, COP, DCM, EMR, WFC, GE, HCN, HCP, O, ITW, JNJ, PM, PG, KMP, KO, LEG, MCD, MMM, MORL, MTGE, NLY, TCAP, STON, T, TGH, TGT, VNR. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Source: 2013: A High Yield Portfolio Year In Review