Here’s my 5th annual performance review of my dividend Portfolio.  Man, is this overdue!

2022 is nearly 2/3 complete and I’m finally getting this post out showing 2021 results.  I apologize for the delay, as I really prefer to share the annual results sooner in the calendar year.

You may have a hard time remembering what even transpired in the markets last year until you see some of my numbers.

I’ll aspire for a more timely post next year.

Anyway, what am I going to cover in this post?  Well, I’ll start by examining my Portfolio performance in 2021.  I’ll follow that up by sharing my Portfolio’s 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 (and my Portfolio contains many of them), 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 2021.  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.

 

2021 Portfolio Performance

Let’s start by looking at the performance of my entire Portfolio for 2021.  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 2021, my Portfolio return was a stellar 23.97%.  There were not a lot of ups and downs in my Portfolio performance in 2021.  As the year progressed, the gains just steadily came.

Unfortunately, despite the terrific return for my Portfolio, it did not beat the return of the S&P 500 Index, which posted a 2021 return of 28.83% including dividends.  My Portfolio trailed the index by over 4.8% for the year!  That’s two years in a row of being bested by the S&P 500.

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

Due to my Portfolio’s performance in 2021, its annualized return climbed higher for the 4th year in a row.  It rose from 13.48% to 15.19%.  Last year I reported that my Portfolio and the S&P 500 were in a dead heat with regard to CAGR since the start of 2015.  However, my source for S&P 500 return numbers made a negative adjustment to the annualized S&P 500 return in the past year, and thus, my Portfolio now leads the S&P 500 in CAGR since the start of 2015 (15.19% vs 14.97%), despite not performing as well in 2021.

 

 

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.

My Portfolio still holds a lead in annualized return results relative to VTI (15.19% vs. 14.24%), despite VTI making up some ground in 2021.

Note – In the case of VTI, I show returns without dividends being reinvested.

 

2021 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 2021, 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 2021 that remained in as the year came to an end.

Stocks shaded in purple were both added and subsequently removed all in 2021.

As you can see, in 2021 I added 9 stocks to my Portfolio, removed 4 stocks, while 2 stocks both entered and departed my Portfolio.  This was nearly the exact same amount of stock movement as I had in 2019 & 2020.  I’m nothing if not consistent.

I calculated the IRR for each stock (see “+ reinv. div.” column) and ranked the stocks from highest to lowest based on this IRR.  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 2021), to the last day of the year (or the last day I held the stock in 2021).  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 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 and enhanced my returns included: UnitedHealth Group (UNH), 3M Co. (MMM), Gentex (GNTX), Skyworks Solutions (SWKS), Amgen (AMGN), and Merck & Co. (MRK).  In the case of UNH, AMGN and MRK they were timely buys, while it was timely trims for MMM, SWKS and GNTX.

On the other hand, I can’t say I had many stock transactions that negatively impacted my performance.  However, Bristol-Myers Squibb (BMY) stands out a bit.

Regarding the two stocks in purple… both were spinoffs that I decided to remove from my Portfolio rather than build the position out.  Orion Office REIT (ONL) was a spinoff from Realty Income (O), while Organon & Co. (OGN) was a spinoff from MRK.

 

 

From the 61 stocks in the table, you can see that 53 had positive returns for me, with Iron Mountain (IRM) leading the charge with an impressive 67.20% return.  Outside of IRM, all my top performers in 2021 were existing Portfolio positions.

For the 3rd year in a row, I had 5 stocks that delivered returns over 50%.  Gains were widespread as 32 stocks managed to top a 20% total return.  There was plenty of green in 2021.

You can see from the table that my 3 worst performers all had returns south of -10%, with The Walt Disney Co. (DIS) notching the worst return, at -14.51%.  This is interesting because last year DIS was my best performer (+94.65%).  It seems like it would be hard to go from first to worst, but that’s what DIS did.

Thanks to reinvested dividends and some timely buys for 3 stocks, I managed to turn negative price appreciation for the year into a positive return.  This occurred with AMGN, MRK, and Pinnacle West Capital (PNW).

Recall that my overall 2021 Portfolio return was 23.97%.  Thus, 23 of the stocks in the table finished with a better individual return than my Portfolio overall.

 

Here are the return percentages for the individual holdings in chart form, offering a different way to look at the data.

 

For reference, the individual sectors of the S&P 500 that performed better than the 28.83% put up by the entire index in 2021 were:

• Energy (54.6%)
• Real Estate (46.2%)
• Financials (35.0%)
• Information Technology (34.5%)

The Energy sector was the top performer in 2021 after being the worst in each of the previous 3 years.

The individual sectors of the S&P 500 that performed worse than the entire index in 2021 were:

• Materials (27.3%)
• Healthcare (26.1%)
• Consumer Discretionary (24.4%)
• Communication Services (21.6%)
• Industrials (21.1%)
• Consumer Staples (18.6%)
• Utilities (17.7%)

Even the worst-performing sectors all recorded gains north of 17.5%… Wow!  What a year.

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.

 

Summary

A steady climb to lofty heights seems to describe my Portfolio return in 2021.  I posted nearly a 24% return for my Portfolio, with only 8 of 61 stocks delivering a negative return.

Existing holdings littered my top performers in 2021.  IRM was the best with a return of 67.20%, but another 16 stocks delivered at least 30%+ returns.

Negative returns were limited.  Only 4 stocks lost more than 4% in my Portfolio: Air Lease (AL), Omega Healthcare Investors (OHI), VF Corp (VFC) and DIS.  DIS was my worst performer with a return of -14.51%.

For a 2nd straight year, I under-performed my S&P 500 benchmark – by 4.86% in 2021.  However, my Portfolio’s annualized return since the beginning of 2015 (15.19%) maintains a slim lead when compared to the S&P 500 (14.97%).

 

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 4 Performance Check posts in 2021, bringing the total number of stock performances reviewed to 20.  Here are the stocks reviewed thus far: PG, AFL, RPM, PEP, JNJ, AL, GILD, TROW, FAST, WPC, O, GNTX, QCOM, XOM, SWKS, ITW, BLK, DGX, UNP & VFC.  Note – the most recent post always updates the returns of the stocks previously profiled.

 

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 2021.  The IRR formula used is provided below the table.

 

 

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(B294:B371,A294:A371,0.1), 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 23.97%, assuming your ‘portfolio return’ cell is formatted to be a percentage with 2 decimal places.

If you end up calculating your 2021 portfolio return, I’d love to hear how you did.

Hopefully I’ll be back in less than a year with the annual performance review for 2022.