08-16-2014, 05:06 PM
(08-16-2014, 10:24 AM)hendi_alex Wrote: Most of you investors seem to be a bit to anal in tracking performance, for my taste. That is not a slam, as factoids is way over the top on crunching numbers, and gets real kudos for his efforts and for sharing. But I'm just not into elaborate spread sheets with all kinds of detail tracking. Nevertheless, your discussion has prompted me to review thoughts on performance goals and measurement. The thoughts below are a bit rambling as they were constructed real time, unfolding as the piece was typed. Hope that the ideas express enough clear content to generate some responses or stimulate some discussion.
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I know that my main goal relates to cash flow generated, and I know that my secondary goal relates to total return which adds capital appreciation to the expectation.
In the past, probably 10-12 years ago my goal was stated simply: [for existing investments to grow by at least 10% per year.] Later I decided that such was really a hope or a wish, and not really a goal. So the goal was changed to [outperform the S%P500 each year.] The measure of that out performance would obviously be a measure of my success. But once again it hit me that such was not a real goal, but was still just a wish or a prayer. I said the heck with it, and just started appreciating the gains that the portfolio generated from the various strategies employed. I guess the goal became, [do the best I can as the market is going to do what it does, and I have little control over the outcome.] Well there have been very few years since 2002 that my investments didn't generate over 10% per year return. Of course there was the one year period between 2008 and 2009 tafter which it took almost four years to once again hit the previous high from 2007.
Now I'm revisiting this idea. With the same primary goals related to income and total return. I'm thinking that in the short run, there is no reasonable goal that can be stated that relates to total return. Share price is just too volatile, too fickle. Could the goal best be stated in terms of CAGR of the dividend stream? Problem there is that fresh money is constantly being added to the portfolio, and making adjustments for that becomes at the least very confusing to me.
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? And when should a stock be put on probation, and what would trigger either a sell or accumulate reaction?
So this is where I currently am. It would reasonable to see a certain growth in income stream. That growth should be greater for dividend growth stocks than with higher yielding slower growth issues. What is a reasonable standard for growth of a 3% or 4% yielding stock? What is a reasonable standard for growth of a greater than 6% yielding stock? When should a ticker be placed on probation? How long should the stock stay on probation before a sell? How much emphasis should be placed on total return, as an income stock could have slow dividend growth but could still be giving an excellent total return?
At this point, I'm thinking that the focus is now in the right direction and many of the right questions have been stated. Perhaps with some appropriate reasearch, some participation on this board, and accumulating some data from existing positions, I can begin to state some realistic goals and over time track performance toward those goals.
Thanks in advance for any replies.
Great questions Alex!!
All of my stocks are dividend growth stocks. If they do not grow the dividends on an annual basis they are gone. Period. End. of. story.
This goes for my high yield stocks as well. APU, current yield 7.6%, 5 year dividend growth rate 4.3%, 3 year is 6%. Not bad.
BCE - Current yield 5%, 3 year growth rate 7.6%
My utilities all have dividend growth.
For many companies I am looking for dividend growth rates double the rate of inflation. That works for now. But, there are allowances made for individual companies. O had a big dividend increase when it acquired ARCT - 19%. They get some slack for the very low increase rates since then. I need to see a pick up in dividend growth by the end of 2015, but they have earned some patience by front-loading those increases.
Finally, in the dividend growth side of the portfolio - which is 87% of the total I am good with paraphrasing chowder's goal - a reliable and growing income stream from financially strong companies.