Focusing On Portfolio Goals Keep You From Selling In A Volatile Market

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Includes: DIA, IWM, QQQ, SPY
by: DGI Guy

Summary

The market is down and I have lost a lot of paper value.

My dividends are already up almost 3% on only 4 of my 25 positions. This is half way to my annual goal of dividend growth.

Ford released a special dividend instead of a raise? Should we consider Ford as "frozen"?

Introduction

The year is off to a tough start if you are an investor. I have lost a lot of money - on paper. The market has lost a lot of money. This is a great time to focus on things that are important to you. Do you know your portfolio goals? This is the time to have those things set in stone so you do not do anything stupid.

Dividend Growth

For me, I am a dividend growth investor. In that respect, things could not be going better! You can read some of my previous work to see the goals and reason this portfolio exists. In short form, my goals are a 3.5% yielding portfolio with a 5% growth rate. In the portfolio, I have already had 4 raises - well 3.5 raises (more on that later) on the 25 positions that I have in the portfolio. Already, mid-way through January, my income for the year is set to rise 2.8% based on just 16% of my positions! That is amazing! I have beat inflation already this year (most likely). Do not get me wrong, I did lose a ton of money, but total return is not my goal for this portfolio. I want to make and grow a stream of dividends. To me, I think of it like the old apartment example. If I were growing my rent in 2008 to 2009 but I lost 10% of the value of my real estate, would I care? I do not think so. I am creating a growing a passive income. So far so good!

It is understanding your goal that helps you through volatility. Did you do your homework when you purchased the company? Nothing has changed about the fundamentals of the businesses that you own? Has the dividend continued to grow? If you answer yes to all these then your job is to do nothing!

Portfolio

Below is a recap of my portfolio. The value of the portfolio has TANKED. One way to deal with it is to sell it all and get tanked! The other way is to be clear and understand what you want out of your assets. I expect to generate over $4,300 in income from my portfolio this year. This will get collected and reinvested back into the portfolio.

Ticker

Shares

Quarterly Div

Expected Income

Yield

Raise Timeline

Last Raise

2016 Raise

AFL

50

$0.41

$82.00

2.88%

November

5%

AMGN

66

$1.00

$264.00

2.72%

February

27%

Yes

AMP

58

$0.67

$155.44

2.88%

April

16%

CMI

44

$0.98

$172.48

4.62%

August

25%

COH

44

$0.34

$59.84

4.32%

Froze - Mar 2013

CVX

30

$1.07

$128.40

5.30%

Froze - Mar 2015

EMR

90

$0.48

$171.00

4.39%

Nov

1%

F

150

$0.15

$90.00

4.93%

Jan

15%

Maybe? Special 0.25

GILD

55

$0.43

$94.60

1.84%

June

0

GM

234

$0.38

$355.68

5.00%

January

6%

Yes

GPS

130

$0.23

$119.60

4.09%

April

5%

HSY

50

$0.58

$116.00

2.76%

August

9%

JNJ

31

$0.75

$93.00

3.09%

May

7%

JPM

75

$0.44

$132.00

3.06%

Jul

10%

KO

150

$0.33

$198.00

3.15%

Mar

6%

MS

210

$0.15

$126.00

2.23%

Apr

50%

RY

50

$0.79

$158.00

6.55%

Oct / Apr

8%

SO

200

$0.54

$432.00

4.63%

May

4%

T

300

$0.48

$576.00

5.68%

Jan

2%

Yes

TUP

40

$0.68

$108.80

5.47%

Froze - mar 2015

UNP

35

$0.55

$77.00

2.98%

Jan

20%

UTX

30

$0.64

$76.80

2.89%

Feb

8%

WFC

75

$0.38

$114.00

3.05%

May

7%

VZ

50

$0.57

$113.00

5.11%

Oct

3%

XOM

60

$0.73

$175.20

3.88%

May

6%

Total

$4,188.84

Click to enlarge

Dividends Collected

Also, the dividend will continue to grow throughout the year - no matter what happens to share price. Below is a chart that shows how my dividends in this portfolio have grown over time. I started out when I was just investing the money back in the beginning of 2014 with under $200 in dividends. For you new investors, note that it took me almost 2 full years to get invested in a portfolio that I liked. You do not need to throw money into the market as soon as it comes available. Take your time. Do your research. Build your confidence in understanding the businesses that you are investing in for the long term.

Click to enlarge

An Interesting Situation - Ford

At the start of this article, I mentioned that I had 3.5 raises this year. They have come from AMGN, GM, T and F. I am not sure I understand how to think about what Ford has done. Ford issued a dividend of 0.15 for all 4 quarters of 2015. Today, they have come out with a statement that the Q1 dividend would stay flat at 0.15 per share, but that there is an issue of 0.25 per share in a special dividend. On my 150 shares, this means my income from 2015 was $90.00. Assuming that Ford leaves the dividend at 0.15 for the year, my income will be $90.00 from the regular dividend and $37.50 for the special dividend. This totals $127.50 for a raise of over 40% in terms of 2016 income. So is this a raise or should I consider it 'frozen'?

Going back to my 3 questions from above:

  1. Did you do your homework when you purchased the company?
  2. Nothing has changed about the fundamentals of the businesses that you own?
  3. Has the dividend continued to grow?

I can answer yes to all 3. I will continue to hold even though the 'raise' is non-traditional.

Conclusion

Going back to my overall portfolio I see that I have lost a lot of money. Do I care? Not really. Markets go up and down. What keeps me safe is that I know my portfolio goals. My income has continued to climb. My positions continue to deliver on expectations (ok, maybe not COH). Most important to me, I am meeting my portfolio goals. How are you guys handling the down turn? Are you finding buying opportunities or do you find yourself hitting the sell button?

Disclosure: I am/we are long ALL STOCKS MENTIONED IN THIS ARTICLE.

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.