How do you state your goals, and how do you measure outcomes?

[Be Here Now]

(08-16-2014, 10:24 AM)hendi_alex Wrote: What about looking at average annual growth rate of dividends per share. The problem there comes from the fact that the portfolio consists of some high yield low growth stocks as well as lower yielding higher growth stocks, and everything in between. These two categories would have to have different standards. How should those standards be stated?

I too have some HYLG stocks and some LYHG stocks. I tackled the problem of measuring dividend growth rates by calculating the weighted average growth rate for the entire portfolio. To do this I weight each stock's growth rate by the percentage of the total market value of the portfolio represented by that stock, then sum the weights.

For example, MO is 8% of my portfolio by current market value. Its one year DGR is 8.24%. 8% x 8.24% = 0.66%.

The one year total for my portfolio is currently 9.22%. I do the same for 3 and 5 year DGRs.

When I decided to measure my DGR as I do, one factor in the decision was that my portfolio is dynamic. I reinvest some dividends, and the dividends that I do not spend, I accumulate for opportunistic reinvestment. Thus my portfolio has a lot of moving parts - 36 positions currently - and they all change fairly often. Another factor was the same problem posed by alex. The weighted average method seemed like a reasonable solution.

I use the same spreadsheet to perform some other statistical analyses. I compute the weighted average beta and standard deviation. I compute the 1-, 3-, and 5-year chowder numbers; since I want DGRs to be fairly consistent over time, I think multiple chowder numbers have some merit.

I have a written investment plan, and I have published the goals and some of the strategy from my plan in my Seeking Alpha profile. Some highlights: I want high current income and income that increases faster than inflation. I want to never spend any of my capital; this was how people accumulated wealth before MPT became popular. Thus, I do not care about or measure total return. I own no bonds and have no plans to ever own a bond, even though I am retired. Bonds are fixed income, and I have several pensions that provide fixed income. If I were to receive the same amount of income from 10 year treasury bonds, I would need ~$2.1MM in bonds, which is more than the value of all of my brokerage accounts combined.

I use Morningstar for the DGRs, betas, and standard deviations. If you create a portfolio or watch list with Morningstar, you can export it as a spreadsheet, which I find to be very handy.