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I am an electrical engineer and have been a minor partner in a local business for the past several years, where I keep the books. I have followed and studied the stock market for over 30 years, developing a trading style which suits my personality. My style changes with my perception of the... More
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  • DVK Portfolio Comparison To SPY, Using Sharpe Ratio

    In a recent article David Van Knapp (DVK) wrote about measuring the 'Success' of a Dividend Portfolio. When DVK writes an article about the performance of his Dividend Growth Portfolio he usually discusses the Portfolio's income and growth of income. He usually also does a comparison of Total Return to the ETF SPY. After seven years of leading SPY he finally lagged by a few tenths of a percent in TR.

    In the comments section of that article I noted that over the seven year lifetime of his portfolio he had underperformed the ETF SPY (with distributions reinvested) by only a few tenths of a percent in CAGR. I also pointed out that his portfolio Beta was likely in the 70% to 80% range, so by my way of thinking his risk adjusted returns were higher. His portfolio value moved up and down about 25% less, so his variance in returns should be lower, thus giving him a higher reward/risk ratio.

    Another commenter replied to my post indicating that DVK's portfolio had a much lower Sharpe Ratio than SPY over the final three year period of the seven years since DVK started.

    I replied that the start of the past three year period was the low point in valuation for SPY and thus the relative gains over that span would have to be better than DVK because SPY had fallen farther behind over the four preceding years. I don't think the poster intentionally cherry picked the three year span, but given the entire seven year history, why would you compare only a part of the interval?

    DGI is supposed to be a long term investment method. The most appropriate measure of 'success' in my way of thinking is "all the data you've got". In this case that would be seven years.

    So I asked myself, "What does the real comparison of Sharpe Ratio look like over the entire seven years?".

    I sent DVK a message explaining my desire to calculate the Sharpe Ratio over the entire time period, but to do so I would need the portfolio values on a monthly basis. Could/would he provide them, pretty please?

    I guess he was interested in the results because he was kind enough to send me those monthly portfolio values, starting at 6/1/2008 through 5/31/2015. I copied them into a spreadsheet and then generated matching values for a 100% SPY portfolio starting on the same day and valued on the same days DVK sent me for his portfolio.

    To generate the SPY values I used the longrundata website. I entered $46,783 as the starting value on 6/1/2008 and generated / recorded the portfolio value for each month end through 5/31/2015. The data for both portfolios are shown in the table below:

    Date

    DVK DGP

    Monthly Gain/Loss

     

    Date

    SPY

    Monthly Gain/Loss

    06/01/08

    $46,783.00

      

    06/01/08

    $46,783.00

     

    06/30/08

    $41,733.00

    -10.79%

     

    06/30/08

    $43,320.00

    -7.40%

    07/31/08

    $44,472.00

    6.56%

     

    07/31/08

    $42,931.00

    -0.90%

    08/31/08

    $44,836.00

    0.82%

     

    08/31/08

    $43,595.00

    1.55%

    09/30/08

    $44,606.00

    -0.51%

     

    09/30/08

    $39,489.00

    -9.42%

    10/31/08

    $44,836.00

    0.52%

     

    10/31/08

    $32,966.00

    -16.52%

    11/30/08

    $36,464.00

    -18.67%

     

    11/30/08

    $30,672.00

    -6.96%

    12/31/08

    $36,533.00

    0.19%

     

    12/31/08

    $30,972.00

    0.98%

    01/31/09

    $32,529.00

    -10.96%

     

    01/31/09

    $28,429.00

    -8.21%

    02/28/09

    $29,819.00

    -8.33%

     

    02/28/09

    $25,374.00

    -10.75%

    03/31/09

    $31,946.00

    7.13%

     

    03/31/09

    $27,488.00

    8.33%

    04/30/09

    $32,960.00

    3.17%

     

    04/30/09

    $30,219.00

    9.94%

    05/31/09

    $34,434.00

    4.47%

     

    05/31/09

    $31,985.00

    5.84%

    06/30/09

    $35,232.00

    2.32%

     

    06/30/09

    $31,964.00

    -0.07%

    07/31/09

    $36,894.00

    4.72%

     

    07/31/09

    $34,349.00

    7.46%

    08/31/09

    $37,870.00

    2.65%

     

    08/31/09

    $35,618.00

    3.69%

    09/30/09

    $39,294.00

    3.76%

     

    09/30/09

    $36,881.00

    3.55%

    10/31/09

    $39,155.00

    -0.35%

     

    10/31/09

    $36,172.00

    -1.92%

    11/30/09

    $41,629.00

    6.32%

     

    11/30/09

    $38,400.00

    6.16%

    12/31/09

    $41,706.00

    0.18%

     

    12/31/09

    $39,134.00

    1.91%

    01/31/10

    $41,033.00

    -1.61%

     

    01/31/10

    $37,711.00

    -3.64%

    02/28/10

    $42,431.00

    3.41%

     

    02/28/10

    $38,888.00

    3.12%

    03/31/10

    $44,738.00

    5.44%

     

    03/31/10

    $41,255.00

    6.09%

    04/30/10

    $46,278.00

    3.44%

     

    04/30/10

    $41,894.00

    1.55%

    05/31/10

    $43,551.00

    -5.89%

     

    05/31/10

    $38,565.00

    -7.95%

    06/30/10

    $42,219.00

    -3.06%

     

    06/30/10

    $36,570.00

    -5.17%

    07/31/10

    $45,243.00

    7.16%

     

    07/31/10

    $39,067.00

    6.83%

    08/31/10

    $45,195.00

    -0.11%

     

    08/31/10

    $37,310.00

    -4.50%

    09/30/10

    $47,484.00

    5.06%

     

    09/30/10

    $40,651.00

    8.95%

    10/31/10

    $48,057.00

    1.21%

     

    10/31/10

    $42,204.00

    3.82%

    11/30/10

    $47,195.00

    -1.79%

     

    11/30/10

    $42,204.00

    0.00%

    12/31/10

    $48,647.00

    3.08%

     

    12/31/10

    $45,026.00

    6.69%

    01/31/11

    $48,615.00

    -0.07%

     

    01/31/11

    $46,075.00

    2.33%

    02/28/11

    $49,896.00

    2.63%

     

    02/28/11

    $47,675.00

    3.47%

    03/31/11

    $50,317.00

    0.84%

     

    03/31/11

    $47,681.00

    0.01%

    04/30/11

    $52,395.00

    4.13%

     

    04/30/11

    $49,062.00

    2.90%

    05/31/11

    $53,124.00

    1.39%

     

    05/31/11

    $48,512.00

    -1.12%

    06/30/11

    $53,030.00

    -0.18%

     

    06/30/11

    $47,693.00

    -1.69%

    07/31/11

    $51,326.00

    -3.21%

     

    07/31/11

    $46,739.00

    -2.00%

    08/31/11

    $52,401.00

    2.09%

     

    08/31/11

    $44,170.00

    -5.50%

    09/30/11

    $50,527.00

    -3.58%

     

    09/30/11

    $41,103.00

    -6.94%

    10/31/11

    $53,114.00

    5.12%

     

    10/31/11

    $45,590.00

    10.92%

    11/30/11

    $53,993.00

    1.65%

     

    11/30/11

    $45,405.00

    -0.41%

    12/31/11

    $56,128.00

    3.95%

     

    12/31/11

    $45,879.00

    1.04%

    01/31/12

    $55,716.00

    -0.73%

     

    01/31/12

    $48,007.00

    4.64%

    02/29/12

    $56,308.00

    1.06%

     

    02/29/12

    $50,090.00

    4.34%

    03/31/12

    $57,573.00

    2.25%

     

    03/31/12

    $51,701.00

    3.22%

    04/30/12

    $57,855.00

    0.49%

     

    04/30/12

    $51,356.00

    -0.67%

    05/31/12

    $56,278.00

    -2.73%

     

    05/31/12

    $48,272.00

    -6.01%

    06/30/12

    $58,797.00

    4.48%

     

    06/30/12

    $50,231.00

    4.06%

    07/31/12

    $59,981.00

    2.01%

     

    07/31/12

    $50,825.00

    1.18%

    08/31/12

    $59,948.00

    -0.06%

     

    08/31/12

    $52,098.00

    2.50%

    09/30/12

    $59,963.00

    0.03%

     

    09/30/12

    $53,419.00

    2.54%

    10/31/12

    $58,820.00

    -1.91%

     

    10/31/12

    $52,447.00

    -1.82%

    11/30/12

    $58,847.00

    0.05%

     

    11/30/12

    $52,744.00

    0.57%

    12/31/12

    $59,107.00

    0.44%

     

    12/31/12

    $53,215.00

    0.89%

    01/31/13

    $62,777.00

    6.21%

     

    01/31/13

    $55,939.00

    5.12%

    02/28/13

    $64,354.00

    2.51%

     

    02/28/13

    $56,653.00

    1.28%

    03/31/13

    $67,215.00

    4.45%

     

    03/31/13

    $58,804.00

    3.80%

    04/30/13

    $70,343.00

    4.65%

     

    04/30/13

    $59,934.00

    1.92%

    05/31/13

    $67,864.00

    -3.52%

     

    05/31/13

    $61,349.00

    2.36%

    06/30/13

    $67,851.00

    -0.02%

     

    06/30/13

    $60,530.00

    -1.33%

    07/31/13

    $69,588.00

    2.56%

     

    07/31/13

    $63,658.00

    5.17%

    08/31/13

    $66,185.00

    -4.89%

     

    08/31/13

    $61,749.00

    -3.00%

    09/30/13

    $67,108.00

    1.39%

     

    09/30/13

    $63,703.00

    3.16%

    10/31/13

    $70,646.00

    5.27%

     

    10/31/13

    $66,653.00

    4.63%

    11/30/13

    $70,586.00

    -0.08%

     

    11/30/13

    $68,628.00

    2.96%

    12/31/13

    $70,485.00

    -0.14%

     

    12/31/13

    $70,408.00

    2.59%

    01/31/14

    $68,824.00

    -2.36%

     

    01/31/14

    $67,926.00

    -3.53%

    02/28/14

    $70,974.00

    3.12%

     

    02/28/14

    $71,018.00

    4.55%

    03/31/14

    $72,849.00

    2.64%

     

    03/31/14

    $71,607.00

    0.83%

    04/30/14

    $75,404.00

    3.51%

     

    04/30/14

    $72,105.00

    0.70%

    05/31/14

    $76,225.00

    1.09%

     

    05/31/14

    $73,778.00

    2.32%

    06/30/14

    $77,951.00

    2.26%

     

    06/30/14

    $75,301.00

    2.06%

    07/31/14

    $75,671.00

    -2.92%

     

    07/31/14

    $74,289.00

    -1.34%

    08/31/14

    $78,941.00

    4.32%

     

    08/31/14

    $77,221.00

    3.95%

    09/30/14

    $77,369.00

    -1.99%

     

    09/30/14

    $76,156.00

    -1.38%

    10/31/14

    $80,754.00

    4.38%

     

    10/31/14

    $77,949.00

    2.35%

    11/30/14

    $82,606.00

    2.29%

     

    11/30/14

    $80,091.00

    2.75%

    12/31/14

    $81,670.00

    -1.13%

     

    12/31/14

    $79,887.00

    -0.25%

    01/31/15

    $82,001.00

    0.41%

     

    01/31/15

    $77,520.00

    -2.96%

    02/28/15

    $82,627.00

    0.76%

     

    02/28/15

    $81,877.00

    5.62%

    03/31/15

    $81,456.00

    -1.42%

     

    03/31/15

    $80,591.00

    -1.57%

    04/30/15

    $81,350.00

    -0.13%

     

    04/30/15

    $81,384.00

    0.98%

    05/31/15

    $80,950.00

    -0.49%

     

    05/31/15

    $82,430.00

    1.29%

    In addition, next to each month's valuation I entered a column indicating the gain / loss since the prior month. Those monthly changes are used to calculate the annual standard deviation for each portfolio. Those annual standard deviations are used to calculate the Sharpe Ratios:

    Sharpe Ratio = [ Annual CAGR - Risk Free Rate of Return ] / Annual Standard Deviation

    So using the data from the table above I calculated the following values:

    Category

    DVK Portfolio

    SPY

    Annual CAGR

    8.15%

    8.43%

    Monthly Standard Deviation

    4.13%

    4.78%

    Annual Standard Deviation

    14.30%

    16.57%

    Sharpe Ratio

    0.4299

    0.3878

    For the Risk_Free_Rate_of_Return I used the current 7 Year T-Bond rate of 2.0%

    Based on the above calculations using the entire seven year period of data it appears that my initial hunch was correct. DVK's Sharpe Ratio appears to be about 10% higher than the Sharpe Ratio for SPY over the same span.

    Same gain, less volatility.

    Comments are welcome and encouraged. Thanks for reading.

    Jul 14 9:04 PM | Link | 21 Comments
  • Quarterly SPY Dividend And Price Data 4/30/1993 To 4/30/2014

    A simple post with a table of historic quarterly distribution and price data from 4/30/1993 to 4/30/2014.

    Price data taken from yahoo.com. Dividend data taken from spdrs.com.

    Note that in December of 2004 there appears to be an extra distribution. I've highlighted the text in red to denote that event.

     

    SPY

    Close

    Date

    Dividend

    SPY

    04/30/93

    $0.213191

    44.03

    07/30/93

    $0.318020

    44.84

    10/31/93

    $0.286187

    46.84

    01/31/94

    $0.287239

    48.22

    04/29/94

    $0.271177

    45.09

    07/29/94

    $0.304976

    45.91

    10/31/94

    $0.288180

    47.48

    01/31/95

    $0.362730

    47.09

    04/28/95

    $0.268220

    51.59

    07/31/95

    $0.316210

    56.16

    10/31/95

    $0.312260

    58.31

    01/31/96

    $0.372000

    63.67

    04/30/96

    $0.285450

    65.39

    07/31/96

    $0.350940

    64.09

    10/31/96

    $0.351940

    70.84

    01/31/97

    $0.286810

    78.41

    04/30/97

    $0.299258

    80.09

    07/31/97

    $0.349953

    95.31

    10/31/97

    $0.348355

    92.06

     

    SPY

    Close

    Date

    Dividend

    SPY

    01/31/98

    $0.379504

    98.31

    04/30/98

    $0.313421

    111.34

    07/31/98

    $0.352010

    111.78

    10/30/98

    $0.358530

    110

    01/29/99

    $0.391823

    127.33

    04/30/99

    $0.319853

    133.25

    07/30/99

    $0.404970

    132.75

    10/29/99

    $0.372218

    137

    01/31/00

    $0.347552

    139.56

    04/28/00

    $0.370823

    145.09

    07/31/00

    $0.348408

    142.91

    10/31/00

    $0.375319

    142.95

    01/31/01

    $0.411330

    137.02

    04/30/01

    $0.315510

    124.91

    07/31/01

    $0.346440

    121.25

    10/31/01

    $0.369000

    105.8

    01/31/02

    $0.392770

    113.18

    04/30/02

    $0.330980

    107.86

    07/31/02

    $0.353370

    91.25

    10/31/02

    $0.378100

    88.52

     

    SPY

    Close

    Date

    Dividend

    SPY

    01/31/03

    $0.435840

    86.06

    04/30/03

    $0.354380

    91.91

    07/31/03

    $0.360250

    99.39

    10/31/03

    $0.400060

    105.3

    01/30/04

    $0.515590

    113.48

    04/30/04

    $0.394760

    110.96

    07/30/04

    $0.413760

    110.82

    10/29/04

    $0.468780

    113.2

    12/02/2004

    $0.351020

    119.33

    01/31/05

    $0.567890

    118.16

    04/29/05

    $0.467090

    115.75

    07/29/05

    $0.487620

    123.74

    10/31/05

    $0.521690

    120.13

    01/31/06

    $0.671670

    127.5

    04/28/06

    $0.519470

    131.47

    06/16/06

    $0.555470

    124.65

    10/31/06

    $0.579340

    137.79

    01/31/07

    $0.792650

    143.75

    04/30/07

    $0.551270

    148.29

    07/31/07

    $0.655600

    145.72

    10/31/07

    $0.718720

    154.65

     

    SPY

    Close

    Date

    Dividend

    SPY

    01/31/08

    $0.775410

    137.37

    04/30/08

    $0.641950

    138.26

    07/31/08

    $0.669220

    126.83

    10/31/08

    $0.690920

    96.83

    01/30/09

    $0.719340

    82.83

    04/30/09

    $0.561430

    87.42

    07/31/09

    $0.518190

    98.81

    10/30/09

    $0.508330

    103.56

    01/29/10

    $0.590190

    107.39

    04/30/10

    $0.480380

    118.81

    07/30/10

    $0.531280

    110.27

    10/29/10

    $0.602130

    118.49

    01/31/11

    $0.652760

    128.68

    04/29/11

    $0.553320

    136.54

    07/29/11

    $0.627620

    129.05

    10/31/11

    $0.624954

    125.45

    01/31/12

    $0.770130

    131.21

    04/30/12

    $0.613890

    139.77

    07/31/12

    $0.688260

    137.71

    10/31/12

    $0.779450

    141.18

     

    SPY

    Close

    Date

    Dividend

    SPY

    01/31/13

    $1.021830

    149.7

    04/30/13

    $0.693720

    159.68

    07/31/13

    $0.839120

    168.71

    10/31/13

    $0.837950

    175.79

    01/31/14

    $0.980250

    178.18

    04/30/14

    $0.824610

    188.31

       
       

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    May 19 8:21 PM | Link | 1 Comment
  • Dividend Portfolio Rebalancing Smarty-Style

    2014 is underway and I sat down to look over my Dividend Growth portfolio to see how things were going.

    As an engineer, I can't seem to leave anything alone if there appears to be a way to make it a little 'better', so it's not unusual for me to make some changes. Truth be told, I could probably make no changes and watch things turn out just fine, but my engineer gene often gets in the way.

    My portfolio is meant to generate and grow income, so that's what I try to optimize.

    After a quick review of my holdings and some possible replacement stocks, I decided to sell some of my lower yielding / slower growing / cyclical stocks and replace them with higher paying / faster growing DGI stocks.

    Here's what I finally settled on:

    SoldSharesValueIncome1 Yr DGR %
    AFL50$3,114.50$74.006.0
    BMY30$1,528.20$43.202.9
    NSC50$4,480.50$108.005.2
    NUE50$2,438.00$74.000.7
    Totals $11,561.20$299.20 
    BoughtSharesValueIncome1 Yr DGR %
    ARLP40$3,080.00$188.009.7
    MSFT80$2,940.00$89.6016.9
    RCI70$2,965.00$114.809.5
    WEC70$2,900.00$109.2020.4
    Totals $11,885.00$501.60 

    As you can see I will have to add roughly $325 in order to complete these transactions and pay taxes on my capital gains in the original shares. In return, I will increase the total income generated by about $200 annually (~80%) and the rate of growth of that income should also increase going forward.

    In a strict dollars and cents analysis, I am paying $325 (plus taxes) now to receive $200 per year forever. That seems like a reasonable deal to me. The faster growth of those payments is icing on the cake.

    Disclosure: I am long AFL, BMY, NSC, NUE.

    Additional disclosure: I will be initiating positions in ARLP, MSFT, RCI WEC shortly. I am not an investment advisor. Do your own due diligence before buying or selling any stocks. You are responsible for your own holdings and I am not.

    Jan 26 11:43 AM | Link | 3 Comments
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