I’m ready to share another year of Portfolio goals!

After a good 2022 in which I achieved all 3 of my primary goals, but went 0 for 2 with respect to my bonus goals, I’m looking for nothing but goal success in 2023.

Sadly, complete goal success for the year is something I’ve yet to achieve since I started setting Portfolio goals at the start of 2019.  Despite this, I’ve found that setting these annual goals helps to keep me on track towards my long-term goals.  My mid-year review lets me adjust course if needed.

For 2023, I’ve retained my 3 primary goals, but naturally with higher $ targets.  These are my most important goals to achieve.  These primary goals are based on new capital investment, annual forward dividend income, and actual dividend income.

As I’ve done in recent years, I’ll also set some bonus goals.  These bonus goals typically center around trying to bring my Portfolio sector weightings into a desired target range, or targeting a sector in which to add a stock or two.

Let’s get to it… here are my Portfolio goals for 2023.

 

Portfolio Goals for 2023

1) Invest at least $15,000 of new capital in the Portfolio

After 4 consecutive years with a $10K new capital investment target, I’ve decided to up the ante to $15K in 2023.

With my Portfolio growing, the percentage contribution from new capital investment to my forward dividend income has be drifting lower as my investment amount remained static.  So, I’m going to plan on raising my capital investment amount in an attempt to keep it a more significant contributor.

Note that this is ‘new’ capital invested into my Portfolio.  I’ll probably be reinvesting around $17K in dividends during the year, too.  However, the reinvested dividends are already part of the Portfolio, as opposed to new money being added to the Portfolio.

Also note that this is a ‘net’ capital investment, so that money that comes out of my Portfolio (such as sales from my Portfolio or dividends that are not reinvested) subtract from the new capital investment amount.

 

2) Reach $18,750 in annual forward dividend income

I began 2023 with annual forward dividend income of $16,465.09 (or ~$1,372.09/mo.).  This was the result of adding over $2,202 during 2022… very close to the most I’ve added in a single year and just the 2nd time I’ve crossed the $2K threshold.

In order to reach my goal of $18,750 in annual forward dividend income by the end of 2023, I’ll have to add the largest amount of forward dividend income that I ever have in a single year.  That amount is $2,284.91… thankfully, this is not too much higher than my best year (in 2021).

Should I reach my goal, I’ll be averaging $1,562.50/mo. at the end of 2023.  Crossing the monthly average mark of $1.5K seems well within my grasp!

Here’s my outline for adding the needed $2,284.91 to reach my annual forward dividend income goal:

• Reinvest the $16,465.09 in annual forward dividend income that I’m starting the year with at an average 2.75% (i.e. ~$453 in additional forward dividend income due to dividend reinvestment)
• Realize a weighted average 8% dividend raise across the current Portfolio holdings (i.e. ~$1,217 in additional forward dividend income due to dividend raises)
• Invest the $15K of new capital mentioned above at a target yield of ~3.00% (i.e. ~$450 in additional forward dividend income due to new capital investment).  This 3% yield is higher than my year-end Portfolio average of 2.77%, but I believe I can achieve higher yields with my new capital investments in 2023.

In total, that’s ~$2,120 in additional forward dividend income that I’m planning on.  This still leaves me about $165 short of my $2,284.91 target.

Of course, there are ways I can find the final $165 in additional forward dividend income needed to obtain my $18,750 goal:

• Invest more than $15K in new capital
• Invest the new capital and/or the reinvested dividends at a higher yield than I projected (3.0% for new capital investment, and 2.75% 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.  Unfortunately, this backfired in 2022 due to the Portfolio changes I chose to make.

Of course, I’ll need to avoid dividend cuts and suspensions in 2023 as well, but that hasn’t been an issue except in extreme cases (like in 2020 with the pandemic).

 

3) Collect $17,100 in actual dividend income

My actual dividend income powered higher in 2022, finishing at $15,208.55 (for an average of $1,267.38/mo.).  I added $1,742.50 in actual dividend income during the year, with the YoY percentage increase being 12.9%.  This percentage was my lowest yet since starting my Portfolio, which is to be expected as my Portfolio grows in size.

Each year my Portfolio has added more than $1.5K in dividend income to its total, with the most being ~$1,831 in 2021 (outside of 2016 when I heavily added new capital to my Portfolio).

So, if I had to bound the increase in my actual dividend income for 2023, it would be a minimum of $1,521 (10% YoY increase) and a maximum of $1,962 (12.9% YoY increase).  The latter would be my largest $ gain in any given year.

Given that my YoY increase percentage will probably come down in 2023, I think a 12.5% YoY gain target is appropriate, yet challenging.  This would translate into an increase of $1,901.07 and have me finish at $17,109.62 for 2023.  Thus, I’ll round down just a bit and set my goal at $17,100 for my actual dividend income goal (an average of exactly $1,425/mo. by year’s end).

 

Bonus Goal #1 – Continue to increase the weighting of Technology in my Portfolio (reduce the weighting difference needed to get in my target range)

I’m making this bonus goal much easier in 2023 than it was in 2022.  Instead of trying to make up half the Information Technology weighting difference during the year (which turned out to be rather difficult if I must say), I’m only going to require that I reduce the weighting difference at all (i.e. to any degree).

As we started 2023, my Information Technology sector weighting was underweight that of the S&P 500 by 7.24 percentage points.  Ultimately, I would need to increase my Tech sector weighting by 4.24 percentage points just to reach the outside of my +/-3 percentage points target range.

I’m not requiring that sort of progress in 2023.  Any reduction in that 7.24 percentage point weighting difference will do.

 

Bonus Goal #2 – Continue to decrease the weighting of Industrials in my Portfolio (reduce the weighting difference needed to get in my target range)

Again, I’m making a bonus goal easier to accomplish in 2023.  I’ll only be trying to reduce the Industrials weighting difference to any degree, as opposed to trying to make up half the weighting difference.

2023 began with my Industrials sector weighting being overweight by 5.67 percentage points compared to the S&P 500.  I would need to decrease my Industrials sector weighting by 2.67 percentage points in order to reach the outside of my +/-3 percentage points target range.

For 2023, success will be any reduction in the 5.67 percentage point weighing difference.

 

Bonus Goal #3 – Add a stock from the Energy sector to my Portfolio

I haven’t had an Energy stock in my Portfolio for over 2 years.  That’s too bad because that sector has been on a tear during that time period… 50%+ gains in each of the past 2 years.  Could there be more room left to run?  Who knows?

As a result of those gains the past couple of years, I’m now outside of my target Energy sector weighting (which is +/-3 percentage points from the Energy sector weighting of the S&P 500, which was 5.23% at of the end of 2022).  Adding a stock in that sector would not only provide my Portfolio with some representation from the Energy sector, but it would help reduce the weighting difference needed to get into my preferred range.

I don’t see myself adding more than one stock from the sector (as Energy is one of my least favorite sectors), but perhaps I can find something over the course of 2023 to add.

 

Summary

There are no big structural differences with respect to my goals this year compared to last year.  I still have 3 primary goals, but I did transition from 2 to 3 bonus goals.

My primary goals still consist of the 1 investment goal and the 2 dividend income goals.

The bonus goals are comprised of essentially that same 2 sector weighting goals I had last year (made easier), but I also added a bonus goal to purchase one stock for my Energy sector (which currently has none).

Since I’ve made my bonus goals easier this year, there’s a good chance I finally offer up a clean sweep of all my goals in 2023.

I’ll be looking in on these goals come July, as part of my mid-year review.  Until then!…

 

Did you set some portfolio goals for 2023?  Is setting annual portfolio goals a regular practice for you, or something new?  I look forward your Comments!