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Sunday, April 21, 2013

Quarterly Review, Q1-2013

The first quarter of DivGro has come to an end and its time to look at the portfolio's performance.

As stated elsewhere on this blog, the goals of DivGro are to generate reliable and growing dividend income and to generate acceptable total returns exceeding the performance of the S&P 500 index. My strategy is to buy stocks of companies that consistently pay and increase their dividends. By reinvesting those dividends, I'll benefit from compounding and, over time, generate a return that handily beats inflation.

During this quarter, I contributed capital funds in the amount of $16,000 to DivGro (an opening deposit of $12,000 and 4 additional deposits of $1,000 each) and purchased a total of 5 dividend growth stocks. These stocks represent expected dividend income for 2013 of $721.09. At the end of March, DivGro had a market value of $16,736.95. Included in the overall gain of $736.95 is dividend income of $138.88.

The end market value of DivGro represents a simple profit of 4.61%. Of course, a better performance measure is personal rate of return (PRR), which takes into account when new capital is added. I used the XIRR function in Excel to calculate an annualized personal rate of return (PRR) for DivGro for Q1-2013. Including dividend income, DivGro achieved an annualized PRR of 25.72%. This is more than satisfactory, but I have no illusions that future quarters will bring more modest PRRs.

In the quarter ending March 2013, the Dow Jones Industrial Average increased 8.69% while the S&P 500 increased 7.30%:

Jan 1, 2013
DOW: 13,412.55S&P 500: 1,462.4210-YR BOND: 1.84%
Mar 31, 2013
DOW: 14,578.54S&P 500: 1,569.1910-YR BOND: 1.85%

Compared with these benchmarks, DivGro actually underperformed at about 6.43% (25.72% ÷ 4). In the long run, I hope to exceed the performance of the S&P 500 index.

Here is a spreadsheet summarizing DivGro's performance for Q1-2013:
Dividend Increases:
  • GD increased its annual dividend by 9.8% from $2.04 to $2.24, increasing annual dividend income from GD by $7 to $78.40; yield on cost (YoC) is now 3.31%
  • Total expected dividend income for 2013: $721.09
Dividends Received:
  • ETP: $0.8938/unit x 100 units = $89.38
  • INTC: $0.225/share x 120 shares = $27.00
  • CVX: $0.90/share x 25 shares = $22.50
  • Total for Q1 of 2013: $138.88
  • Year-to-date: $138.88 of $721.09 (19.26%)

Outlook For Q2-2013: At the beginning of April, I made a significant capital contibution to DivGro, after a 2-year CD of mine matured and I decided to transfer the funds to DivGro! This should provide a good boost to my portfolio and my dividend income expectations for 2013. I'll report on next quarter's performance in early July.

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