With 2019 completely in our rear-view mirror, it’s time I deliver the 3rd annual performance review of my dividend Portfolio.

I’ll not only examine my Portfolio performance from 2019, but I’ll share its annualized return, or Compound Annual Growth Rate (CAGR), since the beginning of 2015.

I feel it’s important to evaluate my Portfolio as a whole, comparing it to a reference to gauge its performance.  In this case, the reference is an index, the S&P 500 stock index.  Since most stocks with long dividend histories tend to be large-cap stocks, using the S&P 500 index seems appropriate.  If my Portfolio is lagging the index, I might examine my holdings further, looking for the cause of the under-performance.  Is it an individual stock or two facing a significant temporary setback, or a fundamental issue with my overall stock selection?  Could it be that I’m underweight in the best performing sectors?  Maybe I’m beating the index, and I determine I want to stay the course.  In any case, having the performance data can help me to steer my Portfolio in the right direction.

Of course, I want to beat the index over time, otherwise one could argue that I’d be better off just investing in the index.  However, even if I don’t beat the index, I like the control I get with building my Portfolio and thus controlling which stocks are part of it.  I can decide to skew my Portfolio for growth instead of income, or vice versa.  I can also overweight sectors that I like (technology, healthcare, financials, industrials), and underweight those I don’t (utilities, communication services, energy).

Once again, I’ve also tracked the performance of my individual Portfolio stocks for 2019.  This way I can potentially feed the strongest stocks if their prospects are still bright, and perhaps weed out the weaker ones by replacing them with better alternatives.

 

2019 Portfolio Performance

Let’s start by looking at the performance of my entire Portfolio for 2019.  I’ve calculated the Internal Rate of Return (IRR) by keeping track of all cash inflows and outflows from my Portfolio.  Inflows are essentially fresh capital I’ve invested, while outflows are proceeds from stock sales, or dividends that are not re-invested.  The IRR takes into account the timing of my inflows and outflows, as well as the re-invested dividends.

For 2019, my Portfolio return was an astounding 35.07%.  A blowout number, no doubt.  I don’t see many years like that in my future, so I’m enjoying this annual return for as long as I can.

Not only did I have a sweet return, but I handily beat the S&P 500 Index, which posted a 2019 return of 31.10% including dividends.  I nearly beat the index by 4%!  This broke a two-year streak of trailing the index.

Note – I’ve obtained my S&P 500 return numbers from here.

Due to my strong out-performance in 2019, my Portfolio’s annualized return more than doubled!  It climbed from 6.28% to 12.83%.  In addition, I’ve now pulled ahead of the S&P 500 index in annualized return over the trailing 5-year period by over 1.21%, as you can see in the table below (12.83% vs. 11.62%).

 

 

I’m also tracking the performance of Vanguard’s Total Stock Market Index ETF (VTI) in my table as an additional comparison.  VTI has a little more weighting to mid-cap and small-cap stocks.

In the case of VTI, I show returns without dividends being reinvested.  My annualized return results relative to VTI are even more impressive (12.83% vs. 11.05%).

 

2019 Individual Stock Performances

In the table that follows, stocks that aren’t shaded at all were in my Portfolio at both the start and end of the year.  I expect this to be the norm for most of my Portfolio stocks.

Stocks shaded in blue were sold in their entirety during 2019, and thus are no longer part of my Portfolio.  All of these stocks were in my Portfolio to start the year.

Stocks shaded in red were new additions to my Portfolio in 2019 that remained in as the year came to an end.

Stocks shaded in purple were both added and subsequently removed all in 2019.

As you can see, in 2019 I added 8 stocks to my Portfolio, removed 4 stocks, while 1 stock both entered and departed my Portfolio.

I calculated the IRR for each stock (see “+ reinv. div.” column) and ranked them from highest to lowest based on this column.  For those stocks that weren’t in my Portfolio for the entire year (i.e. those shaded in blue, red or purple), I use a simple return.  If I had used the IRR calculation in these cases the percentage returned would have been noticeably incorrect, especially for those stocks with short holding periods.

There are percentages in two columns.  The first column (price appreciation only), shows the return of the stock from the beginning of the year (or the first day I held the stock in 2019), to the last day of the year (or the last day I held the stock in 2019).  This just shows how the stock performed price-wise over the time period I owned it.  The second column (+ reinvested dividends) shows the percentage return given price appreciation, plus the timing of reinvested dividends, plus the timing of any buys and sells during the year.

In most cases, when I don’t make additional buys or sells of the stock during the year, the second column percentage will be slightly higher than the first column by the stock yield (+ or – a bit given the timing of the reinvested dividends).  However, in those cases where I did make additional buys or sells of the stock during the year, the return can be affected rather dramatically, based on the size & timing of my transaction.  Thus, I wanted to highlight those stocks, as it can help explain some of the larger than normal differences in my return versus that of just the stock price return.

A few stocks in which I made timely transactions included JPMorgan Chase & Co. (JPM), UnitedHealth Group (UNH), and Eastman Chemical (EMN).  I didn’t really have any untimely transactions for stocks that remained in my Portfolio, as with stocks climbing higher most of the year, it was hard to see negative impacts.  However, I did leave some returns on the table when I sold a stock position entirely.  For instance, D.R. Horton (DHI) continued to power noticeably higher after I sold it.

 

 

From the 51 stocks in the table, you can see that 49 had positive returns for me, led by a massive 99.32% return from Target (TGT).  Who would have thought that a stock for a large, established company such as TGT could appreciate to such a degree in a single year?  TGT ran so far and so fast to the upside than my covered call option eventually got assigned this past January.  As a result, TGT is no longer a part of my Portfolio as we head into 2020.

Not too far behind with a return of 83.77% was Skyworks Solutions (SWKS).  Such a strong return is much more likely from a tech stock like SWKS.

Maybe even more impressive was the fact that 5 more stocks delivered returns over 50%, another 6 logged returns over 40%, and still another 14 registered returns over 30%.  Holy smokes!

Amazingly, only two stocks posted negative returns, and they were both low single-digit losses.  I sold Cognizant Technology Solutions (CTSH) during the year, while it had a -1.36% return for me.  My worst performer was 3M Co. (MMM), returning -3.44% in 2019.  Cardinal Health (CAH) and Abbvie (ABBV) were two stocks that declined in price over the course of the year, but I was able to squeak out a positive return thanks to their dividends.

Recall that my overall 2019 Portfolio return was 35.07%.  So, 21 of the stocks in the table finished with a better individual return than that, and the other 30 finished with a lower return – a little top heavy.

 

Here are the return percentages for the individual holdings in chart form, offering a different way to look at the data.  I was so close to seeing no red at all in 2019!

 

For reference, the individual sectors of the S&P 500 that performed better than the entire index in 2019 were:

• Information Technology
• Communication Services
• Financials

Tech really pulled the entire index higher in 2019.

The individual sectors of the S&P 500 that performed worse than the entire index in 2019 were:

• Industrials
• Real Estate
• Consumer Discretionary
• Consumer Staples
• Utilities
• Materials
• Healthcare
• Energy

This was the 2nd year in a row that Energy was the worst performing sector in the S&P 500 index.

Here’s a link to a colorful website page that shows each S&P 500 sector’s performance versus the overall index for every year since 2007.  Once you get there, let your mouse hover over one of the sectors.  So unique…

 

Summary

Massive Portfolio gains were all the rage in 2019.  I tallied a 35%+ return in my Portfolio, with nearly every stock delivering a positive return (49 of 51 to be exact).

TGT and SWKS led my gainers, with CTSH and MMM weighing my Portfolio down the most.

Even better, I outperformed my S&P 500 benchmark by nearly 4% in 2019, and this allowed me to surge into the lead for annualized return starting from 2015.

I can’t rest on my laurels though, as one bad year can find me trailing the index again.  I’m not planning big changes for my Portfolio, but tweaks will continue to occur, I’m sure.

I suspect I’m going to have a hard time beating my performance benchmark in 2020, as my TGT covered call sale to start the year resulted in me having to sell the shares for less than they were worth.  This put me in a performance hole relative to the S&P 500 to start the year.  There’s work to do to make up the lost ground, but I’ve got almost the entire you to do it.  Wish me luck.

 

As I continue to hold many of my Portfolio stocks over time, you’ll see occasional Performance Check posts on them, detailing their returns for me over longer periods of time than just a single year.  I wrote 5 Performance Check posts in 2019, bringing the total of stock performances reviewed to 12.  Here are the stocks reviewed thus far: PG, AFL, RPM, PEP, JNJ, AL, GILD, TROW, FAST, WPC, O & GNTX.  Note – the most recent post always updates the returns of the stocks profiled in previous posts.

 

Bonus Section – Spreadsheet Data

For interested readers, this section shows my table of spreadsheet data (inflows & outflows) used for the IRR calculation for my dividend Portfolio in 2019.  The IRR formula used is provided below the table.

There was not as much Portfolio activity in 2019 as there was in 2018.  Q1’19 was especially quiet.

 

 

The only data needed for the calculation is in the ‘Date’ and ‘Amount’ columns, aka columns A & B.  Buys are inflows to the Portfolio, while sells, and paid dividends that are not re-invested, are shown as Portfolio outflows.

The info in the ‘Type’ and ‘Notes’ columns is not needed, but I keep it to help me recollect what the transaction was.

As for the formula, it’s this simple: =XIRR(B191:B221,A191:A221,0.1), which I paste into a cell where I want to show my Portfolio return.  One must alter the cell locations in the formula to match those where your data is contained in your spreadsheet.

For the data in my table, you should get 35.07%, assuming your ‘portfolio return’ cell is formatted to be a percentage with 2 decimal places.

If you end up calculating your 2019 portfolio return, I’d love to hear how you did.

‘Til next year…