Bob's Taxable Account - 2019 Review
Long Only, Value, Portfolio Strategy, Dividend Growth Investing
Contributor Since 2011
Bob is a Dividend Growth investor using dividend yield from low beta, recession proven stocks for income and preservation of capital. Bob has self managed his portfolio since early in 2011. He hopes to encourage discussion among those already in retirement and receiving income from their portfolios particularly those facing or about to face Required Minimum Distributions (RMDs).
Bob is a stronger believer in developing a personal portfolio business plan. He restricts his equity investments to stocks to those with investment grade credit of BBB or higher. He believes in setting percentage caps particularly when investing in non-defensive sectors.
Summary
- We had never expected to own a taxable account.
- Circumstances beyond our control changed that.
- After discussions here on SA we opened ours.
- This is our first annual report.
This is the first annual review of our Dividend Growth Taxable Account. It represents the first time since beginning as SD Investors that we are looking through the lens of Total Return rather than Income. The positions selected were chosen following earlier discussions with many of you. The majority were selected at fair or better value as determined by examining 4 yr. Yield.
High DG Rates was a constant along with long term consistency in those rates.
Our Taxable Account is designed to be a supplement to our tax-advantaged (TA) dividend growth income portfolios. It is made up of nine equal weight positions purchased from funds withdrawn as part of Required Minimum Distributions but not spent. With CDs and savings accounts so low we felt this represented the best use of these funds.
The positions in this account all have one thing in common. They are low yield/high dividend growth equities. They are mostly in Sectors underrepresented in our retirement income portfolios like Industrials, Consumer Discretionary and Technology. They are set to automatically re-invest the dividend income produced (DRIP), adding significantly to share count over time.
This account represents two important purposes. First, to supplement income should our main retirement income accounts encounter multiple dividend cuts in the years ahead. Depending on the amount needed the account could first off produce lost income by turn of the DRIPS and adding those funds to our income. Before selling any shares of our main retirement income accounts, selling shares of the most over valued of our taxable positions would take place.
The second purpose of this account is educational. Over the next five to ten years it will help educate our daughters and grandchildren on the importance of compounding. Should a recession occur during that period it will show how non-defensive sectors and sub-sectors and growth stocks in general perform during such periods.
It’s time to reveal just how our portfolio did in its first year.
How about a market beat. Specifically 38.86% vs 31.68 for the S&P 500 Total Return.
PORTFOLIO HOLDINGS
STOCK |
TICKER |
PORTFOLIO % |
5YR.DGR |
Credit |
|
Apple |
AAPL |
14.8 |
11 |
AA+ |
|
Amgen |
AMGN |
10.8 |
19 |
||
Home Depot |
HD |
10.0 |
22 |
A |
|
Illinois Tool Works |
ITW |
10.5 |
18 |
A+ |
|
Microsoft |
MSFT |
11.9 |
10 |
AAA |
|
Nike |
NKE |
9.9 |
12 |
AA- |
|
Paycheck |
PAYX |
9.7 |
10 |
||
TJX Companies |
TJX |
10.1 |
21 |
||
Texas Instrument |
TXN |
10.5 |
20 |
A+ |
As you can see, I’m missing recent credit scores for AAPL and TJX. I would appreciate the assistance of others with these holdings.
I believe a company’s dividend growth over a sustained period is a great indication of future capital again.
Here’s my favorite chart on our portfolio’s performance. It’s the collective DGR for our positions over the past 20 yrs.:
16.7%
Last 5 Years
19.2% per year
Last 10 Years
12.7% per year
Last 20 Years
I know I know “Past performance is no indication”…..
While I have no plans to add to this portfolio, I do plan to re-invest dividends adding to share count over time.
That’s it this round, next up we’ll look again at what would have happened if we followed our advisor’ s advice.