Do
you know how much cash flow your income portfolio generates?
Periodic portfolio evaluation is critical to investing
success. Investors tend to look at
portfolio value.
Income investors should
not start with portfolio value because the most important measure of an income
portfolio is how much money did the investments actually create? Portfolio value is second to income.
The end of June marks half way through 2013. This is the time to check on our
portfolios. You need to find out how
much cash flow your income investments create.
The example provided below uses the various portfolios I
have created over the life of this web/blog.
Look at them so you can see how to track your dividend investments. Then, take the time to measure the cash flow
your own income portfolio generates.
Measure
Portfolio Income:
Measuring your portfolio income is more important
and more difficult than you may think.
You need to follow these steps to gather the necessary data.
List
all your income investments. This list
will include dividend stocks, bonds, and rental properties. If you have mutual funds and you receive income
from the fund, include those under stocks.
If you have privately held REITS or individual rental properties (not
traded on the stock exchange,) include those under rental properties. You can
list annuities as a separate category sort of like social security or if you
have control over your annuity holdings, you could put them into the bond or stockpile.
Calculate
your income portfolio’s value using 6/28/2013 values. Do not try to update the values until you
have your data put together. You may
have multiple accounts and you may not be able to use the broker’s account value
because not all the investments in that account are for income. However, you
should go to the effort. You need to
determine the value of your investments
that are targeted for income.
Add up
the income created year to date using your brokerage statements and those from
your private rental properties. All brokers provide
dividend income and interest income and that will help you track you
income. However, premiums from covered calls, which I
consider an important source of income, are more difficult to add up.
You see covered call
premiums are capital gains and they are lumped in with the capital gains from
selling stocks or mutual funds. Note the
example I provide below measures only dividend income. Start with dividend income before you try to
add in the income created by selling covered calls.
Real estate income is
probably the easiest to find, as the rents tend to go right into your checking
account. Do not muck up your work
by adjusting for tax effects at this time.
DIVIDEND
MACHINE PORTFOLIOS FROM 2011, 2012 AND 2013
I apply the same measurements to my personal
portfolio as I do to the theoretical portfolios profiled in this web/blog. In this blog, I track three dividend
portfolios. I have not added in bonds
or covered calls. You can review my
2011, 2012, and year to date 2013 portfolios in the pages at the top of this
blog post.
Review the three tables below; they present both the
income and capital gains from these three theoretical dividend stocks
portfolios. You can do the same
tracking on your portfolios and I strongly encourage you to begin tracking your
income.
2011 DIVIDEND MACHINES Bought 100 Shares of 52
companies over 52 weeks
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Basis
|
$ 207,336
|
Current Dividend Income
|
$ 8,999
|
||
Value
|
$ 253,585
|
Yield on Basis
|
4.34%
|
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$ Gain
|
$ 46,249
|
Yield on Current Value
|
3.55%
|
||
% Gain
|
22.31%
|
Prices as of 6/28/2013
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The 2011 portfolio was complete in December
2011. Since then, every stock has paid
income. Currently the portfolio pays
almost $9,000 per year. Both dividend
income and portfolio value have increase. Income has increased but not as much as stock
value.
2012 DIVIDEND MACHINES Bought 100 shares of 48 companies over 52
weeks
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Basis
|
$ 208,821
|
Current Dividend Income
|
$ 8,110
|
||
Value
|
$ 242,595
|
Yield on Basis
|
3.88%
|
||
$ Gain
|
$ 33,774
|
Yield on Current Value
|
3.34%
|
||
% Gain
|
16%
|
Prices as of 6/28/2013
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The 2012 portfolio includes 48 stocks picked over
the calendar year 2012. Again both
income and value have increased, yet the portfolio provides only a little over
$8,110 a year. This is $1,000 less per
year than provided by the 2011 portfolio.
The portfolio gain over the 6 months since the portfolio was complete,
is a hefty 16%. Impressive, but our
goal is income and I think 2012 is not as good a portfolio as 2011.
As time goes by, we will compare the results.
2013 DIVIDEND MACHINES Bought 100 Shares of 13
companies to date
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Basis
|
$ 55,939
|
Current Dividend Income
|
$ 2,476
|
||
Value
|
$ 58,253
|
Yield on Basis
|
4.43%
|
||
$ Gain
|
$ 2,314
|
Yield on Current Value
|
4.25%
|
||
% Gain
|
4.14%
|
Prices as of 6/28/2013
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The 2013 portfolio is a work in progress. The goal was to improve on 2012 and the
yield has improved. Capital gains are
modest. I think this portfolio is
better than either the 2012 or the 2011 portfolios because it creates more
income.
Income
is what it’s all about!
TheMoneyMadam
