Alright, time to set some Portfolio goals for 2021!  If you’ve been following along the past 3 years, you’ll note that my track record for achieving my goals has been decent, but not exemplary.

As a quick review, here’s how I’ve fared over the past 3 years…

• 2018 – achieved 2 of 3 goals
• 2019 – achieved 2 of 3 goals
• 2020 – achieved 1 of 3 primary goals, and 1 of 2 bonus goals

As you can see, it’s hasn’t been all bad, but I’ve yet to claim 100% success in any year.  Maybe this will be the year!

I’ve kept 3 primary goals each year, and that won’t change this time around.  I’ll just have new target amounts for them.  These primary goals are based on new capital investment, annual forward dividend income, and actual dividend income.  Then, I’ll throw in some bonus goals.  These aren’t necessarily tied to dollar amounts, but should shape my Portfolio in some manner.

So, let’s get to it.  Here are my 2021 Portfolio goals…

 

Portfolio Goals for 2021

1) Invest at least $10,000 of new capital in the Portfolio

This was the only primary goal I achieved last year, and I think that’s because it’s the easiest one to predict and control.  The $10K amount I’ve set matches what I set each of the past two years.

Keep in mind this is ‘new’ capital introduced into my Portfolio.  I’ll be reinvesting over $12K in dividends during the year, too.  However, I consider the dividends as already being part of the Portfolio, as opposed to new money being added to the Portfolio.

My expected range of new capital is $6K ($500/mo.) to $12K (1,000/mo.), but I’m settling on the upper end of that range ($10K) for my actual target.

I’d definitely like to add more new capital to the Portfolio than $10K, but I can’t commit to it this year.  Regardless of the final amount I achieve, new capital will be added, ensuring continued Portfolio growth in 2021.

 

2) Reach $13,800 in annual forward dividend income

2021 started with annual forward dividend income of $12,036.14 (or ~$1,003.01/mo.).

Prior to last year (when I added “only” ~$1,232 of forward dividend income to my Portfolio), I averaged adding over $1,500 of forward dividend income to my Portfolio each year.  On the high end, I was able to add just over $1,959 in forward dividend income in 2018.

I felt like 2020 was a bit atypical for dividends, and the numbers reflected that.  However, I’m expecting somewhat of a dividend bounce back in 2021.  Certainly, just avoiding dividend freezes, and especially cuts/suspensions is key.

In order to reach my goal of $13,800 in annual forward dividend income by the end of 2021, I’ll have to do better than my past average.  Thus, this may be my most aggressive goal for the year.

To reach $13,800 by the end of 2020, I’ll need to add just under $1,764 in additional forward dividend income over the course of the year.  $13,800 translates to an average of $1,150/mo. by year’s end… seems like a nice number to target, no?

I believe I can add the needed $1,764 given this outline:

• Invest the $10K mentioned above at a target yield of ~3.00% (i.e. ~$300 in additional forward dividend income due to new capital investment)
• Reinvest the $12,036.14 in annual forward dividend income that I’m starting the year with at an average 2.50% (i.e. ~$300 in additional forward dividend income due to dividend reinvestment)
• Realize a weighted average 8% dividend raise across the current Portfolio holdings (i.e. ~$963 in additional forward dividend income due to dividend raises)

Once again I’m expecting the largest portion of additional forward dividend income to come from dividend raises.  I don’t think I achieved a weighted average 8% dividend raise in 2020 (but we’ll see when I post my weighted dividend growth for 2020 in the coming weeks).  Also, we are still dealing with the pandemic.  Thus, 8% may be too aggressive for 2021, but I’m going for it.  I’d really like to crack $1K in additional forward dividend income from 2021 raises alone.

Adding it all up, it’s ~$1,563 in additional forward dividend income that I’m planning on.  This still leaves me $201 short of my $1,764 target.

Here are some ways I can find the final $201 in additional forward dividend income needed to obtain my $13,800 goal:

• Invest more than $10K in new capital
• Invest the new capital and/or the reinvested dividends at a higher yield than I projected (3% for new capital investment, and 2.5% for reinvested dividends)
• Get a larger weighted average dividend raise than the projected 8%.
• Make some strategic stock swaps, trading one or more lower-yielding investments for higher-yielding ones.  I’ve done this a few times over the past couple of years.

Of course, as noted earlier, my plan requires that I avoid any dividend cuts and suspensions in 2021.  This is something that set me back in 2020 and contributed to me coming up short on some of my goals.

 

3) Obtain $13,200 in actual dividend income

Actual dividend income in 2020 finished at $11,634.54 (for an average of $969.54/mo.).

In each of the past 4 years, I’ve seen my actual dividend income rise by at least $1,500 over the previous year.  I don’t see why I can’t achieve that again.  On the high end, I was able to add just over $1,750 in actual dividend income in 2018.  I’d say I might expect to record an actual dividend income boost for 2021 in the range of $1,500 to $1,600 in 2021.  Adding this to the ~$11,635 I’m starting 2021 with, that would put be around $13,200, or a round $1,100/mo average.

This would offer a Year-over-Year (YoY) percentage increase in dividend income of ~13.5%… firmly in double-digit territory, and well past the 10% growth number I want to stay ahead of.  YoY growth has been shrinking for me as my Portfolio size continues to grow, but I’ll be quite happy with 13.5% if I can make it.

If things go really well, I might be able to reach 15% growth in actual dividend income.  This would put me at ~$13,380 by the end of 2021.

 

Bonus Goal #1 – Increase the weighting of Technology and Communication Services in my Portfolio

I generally try to keep my Portfolio’s sector weightings close to that of the S&P 500.  Given that, my Portfolio has two sectors that are noticeably underweight compared to the S&P 500 – Information Technology and Communication Services.  They are both more than 5 percentage points below their weighting in the index.  To help minimize them being underweight in my Portfolio, I’d like to add enough to these sectors such that they are no less than 5 percentage points lower than their index weighting.

As 2021 began, my Tech weighting was still 6.61% below that of the S&P 500.  This is an improvement from the 9.67% weighting difference a year ago, so I’m making progress.  Similar progress in 2021 will get me within the weighting range I’m looking for.

As for Communication Services, my weighting is 5.83% below that of the S&P 500.  I don’t have as far to go to adjust things in this sector, but I still have some work to do to reduce it to <5%.

 

Bonus Goal #2 – Decrease the weighting of Industrials in my Portfolio

My Portfolio has one sector that is noticeably overweight compared to the S&P500, and that’s Industrials.  At the end of 2020, the weighting of this sector within my Portfolio was 16.14% (my 2nd largest sector weighting), while only 8.45% for the S&P 500.  So, my Portfolio has close to double the Industrials weighting, with a 7.69% delta.

I like my current Industrial holdings, and don’t necessarily dislike being overweight this sector.  However, decreasing my weighting so that I’m no more than 5% above that of the S&P 500 should be something I can transition to.  It’s possible I hold off on making adjustments here until the 2nd half of 2021.  If I add to other sectors with my new capital investment, my Industrials weighting would come down naturally, allowing me to re-evaluate things before making any moves.

One quick way to make progress towards achieving Bonus Goals #1 & #2 would be to trim my Industrial holdings and re-allocate the proceeds to Info Tech and/or Communication Services.  We’ll see how things play out over the course of 2021.

 

Bonus Goal #3 – Add a Utility or Energy stock to my Portfolio.

Last year, one of my bonus goals was to add a Utility stock to my Portfolio.  Sadly, I didn’t find a suitable candidate, and my Utility holdings remained at 0.  When I exited my Exxon Mobil (XOM) position last year, the number of Energy stocks in my Portfolio also transitioned to 0.

So, I start 2021 with two sectors that don’t have any representation in my Portfolio.  In general, I’m OK with that, as companies in these sectors tend to offer slower EPS growth and slower dividend growth in exchange for higher yield.  Of course that’s not true for all the stocks in these sectors.  So, I’m going to see if I can find a candidate stock from either of these two sectors this year that perhaps offers decent growth (and a favorable price) and add it to my Portfolio.

 

Summary

I’m upping my game this year and laying out 6 goals for my Portfolio in 2021 – 3 primary goals, and 3 bonus goals.

These goals are comprised of 1 investment goal, 2 dividend income goals, 2 sector weighting goals, and 1 sector stock goal.

Perhaps this can be the year I achieve them all!  Even if I don’t achieve them all, just striving to meet them will mean good things for my Portfolio, and that’s something I can be satisfied with.

I’ll check on my progress towards meeting these goals in the middle of the year (July).  See you then!

 

What’s your most aggressive portfolio goal for 2021?  Has your goal list been growing over the years like mine?  I look forward your Comments!