Time for Another Performance Check
For some background on the idea behind the Performance Check, and the XIRR function used for the calculations, please see my first post in this series.
The series continues with a look at another dividend-paying stock from my Portfolio (this is now the 17th overall). My last Performance Check was 5 1/2 months ago, when I examined my performance for Illinois Tool Works (ITW), which provided a massive compound annual growth rate of 21.69%. Can this be topped by the company I review today? We’ll see.
In this post, I’ll be checking my performance for BlackRock (BLK). BLK resides in the Financial sector, and the Capital Markets industry.
BLK is an investment management firm for both institutional and individual clients. It’s the world’s largest asset manager, with over $8.6 trillion in assets under management (AUM) at the start of 2021.
Risk management and advisory services are also provided by the company. BLK launches and manages client portfolios, mutual funds, ETFs and hedge funds. It also invests in various capital markets around the globe, including government securities and investment-grade municipal securities. It’s hard to find an aspect of financial technology that BLK is not involved in.
You may be familiar with BlackRock’s largest division, which is iShares – a family of more than 800 ETFs that comprise over $1T of those $8.6T in AUM that I mentioned.
BLK became a public company in 1999. The company was founded in 1988 and is headquartered in New York, NY.
It was in 2015 that BLK entered my Portfolio. Not only have I seen good price appreciation since then, but outstanding dividend growth, too. That’s a combination I always desire in my Portfolio. In terms of value, BLK is currently the 5th largest position in my Portfolio. When it comes to dividend weighting, BLK is my 8th best dividend payer.
Before jumping into my performance since initiating a position in BLK, let’s first check out the historical dividend growth for the stock…
You see double-digit growth in each of the 4 reporting periods I show. I can’t ask for much more than that. Dividend growth has been steady in the 10-14% range. The most recent dividend raise from BLK this past January was solidly in that range, too, at 13.77%.
BLK only started paying dividends in 2003. It’s initial attempt to initiate a dividend growth streak was halted when the company held the dividend steady in 2009 at the tail end of the Great Recession. The dividend growth streak for BLK will reach 12 years if it continues to pay out its current dividend through the end of 2021.
The current payout ratio for the stock is ~45% based on this year’s earnings estimate of $36.64/sh. That sweet spot payout ratio coupled with expected earnings growth over the next 2-3 years in the 10% range should allow BLK to keep that historical double-digit dividend growth going.
My Personal Performance for BLK
Below is a capture of the spreadsheet I keep with my BLK cash flows, and the calculated XIRR. Compared to my five legacy Portfolio holdings (PG, RPM, AFL, PEP & JNJ), the table for BLK is small, due to its shorter holding period and small number of transactions. With BLK being a relatively new Portfolio position (about 5 1/2 years), I don’t have a large amount of data/time to factor into the return calculated in this Performance Check. Therefore, as I move forward in the near-term, large price changes can have a significant impact on my annualized return.
Here’s a note with regard to the possible ‘Type’ column entries: EOY Value = End Of Year Value, Dividend = a dividend that was not reinvested (a cash outflow), Options = income from writing options against the shares (another cash outflow).
The duplicate EOY Value entries at the end of each year (one negative, one positive) do not affect the cash flow, and can be thought of as boundary markers, allowing me to make the individual yearly return, and the annualized total return calculations.
I started my BLK position on the 1st day of September, 2015 with 15 shares at a price just north of $293/sh. Since then, I’ve made two other share additions, a 4-share purchase in August 2018 at roughly $468/sh., and a 3-share purchase a couple months later in October 2018 just above $409/sh. With so few transactions, the set of entries is manageable.
Yearly returns for BLK have been outstanding outside of the negative return posted in 2018.
Ever since initiating my position, I’ve been holding my shares and reinvesting my dividends. Due to BLK’s high share price, I’ve added less than 3 shares through dividend reinvestment over the years, and my position currently stands at 24.717 shares.
The following price chart is also helpful to see. It shows the stock price change since my initial purchase on 9/1/2015.
You can see the price decline from 2018 that I mentioned, as well as a big drop at the start of 2020 (arrival of pandemic). Without those, the price trend looks pretty good, with the price climbing significantly since the bottom reached in March 2020.
BLK is only up slightly year-to-date for me, climbing 1.12% for the year (all price appreciation, as no dividends paid yet in 2021). However, plenty of time exists for BLK to hopefully provide a double-digit return for the year.
The yield for BLK has fallen well over 1% in the past year as the stock advanced during the market recovery. The yield currently stands at 2.26%. This is below its 5-yr. average yield of 2.55% , and just a tad below my average Portfolio yield of 2.35%. As a result of some excellent dividend growth by BLK, my yield on cost is 4.68%.
BLK currently has a value weighting in my Portfolio of 3.36%. As noted earlier, this is my 5th largest position out of 52 stocks. Its dividend weighting is slightly lower, coming in at 3.24%.
All BLK dividend payments I’ve received since my position was started have been reinvested.
My current investment in BLK is $7,502.20. My cost basis, which includes $1,220.04 in reinvested dividends, is $8,722.24.
Meanwhile, the current value is $18,034.51, which reflects a capital gain (on paper) of $9,312.27. The annualized total return ends up being 21.48%, covering my initial purchase on 9/1/2015, through 3/20/2021. This is yet another reviewed Portfolio stock that’s reached the 20% mark for annualized growth rate. The number keeps growing!
Summary
It’s hard to complain about the performance I’ve recorded with BLK. My annualized returns have only ever briefly dipped below double-digits, and my current annualized return sits safely over 21%.
The price trend over the years has been up and to the right, which leads to great returns over time. Impressive dividend growth from BLK has resulted in a growing income stream as well.
My 21.48% annualized return with BLK ranks high compared to all the stocks I’ve reviewed thus far.
I won’t be surprised if BLK manages to move higher in my Portfolio rankings in the coming years as the outlook for the company remains strong.
I consider BLK to be a core holding in my Portfolio, and if steady price gains and terrific dividend growth continue to be delivered, that stance definitely won’t change.
Performance Check Comparisons
Bringing the returns for all my other Performance Check stocks up-to-date allows for the comparison in the table below.
The Performance Check stocks I’ve reviewed in the past are: PG, RPM, AFL, PEP, JNJ, AL, GILD, TROW, FAST, WPC, O, GNTX, QCOM, XOM, SWKS & ITW.
The table’s rightmost column shows the year of my initial purchase for each stock, just to provide some detail with regard to how many years are part of the annualized return.
Also note, XOM was sold due to poor performance, so annualized returns are no longer provided for that stock.
BLK debuted in my performance table with its annualized return of 21.48%. This is the 2nd best annualized return for the stocks I’ve reviewed thus far.
It also joins the 20% club – currently 1 of only 5 stocks from the table providing a 20%+ annualized return. BLK joins Qualcomm (QCOM), Illinois Tool Works (ITW), Realty Income (O) and Fastenal (FAST).
So what kind of movement has there been in the table since my last Performance Check over 5 months ago? Well, 8 stocks improved on their annualized returns, while 7 declined compared to last time.
The biggest mover to the upside was Air Lease (AL), increasing its annualized return from 2.96% to 8.94%. That was a big move and it brings the annualized return for AL to a much more respectable number.
The biggest mover to the downside with regard to annualized returns was QCOM, which slipped 1.96%, from 25.27% to 23.31%. I can live with that. Despite this decline, QCOM still holds the best annualized return rate of the Portfolio stocks I’ve reviewed.
The group as a whole continues to sport excellent returns, and new addition BLK only enhances the group’s overall return.
Only one stock in the group shows an annualized return of less than 7.7%, and that’s Gilead Sciences (GILD) at 1.62%. GILD hasn’t sustained any upward price movement in years. GILD has been on notice in my Portfolio for a while now. With Amgen (AMGN) and Merck & Co. (MRK) joining my Portfolio over the past year, GILD could find itself being sold to bolster these other Healthcare positions instead.
On deck for my next Performance Check is Quest Diagnostics (DGX). DGX has provided me with positive returns, but will it be impressive enough to favorably compare to what BLK just provided? Find out next time!
Have you been holding a stock for a few years, but don’t have a good idea of the return the stock has provided for you? It could be time for a Performance Check! I look forward to your comments, as well as you sharing return numbers for any Performance Checks you’ve done.