Annual Portfolio Evaluation – Dividend Earnings Summary for November

Annual Portfolio Evaluation – Dividend Earnings Summary for November


In 2016, I made a motivating and life-altering choice: I took a sabbatical, loaded my family into a compact RV, and set off on a memorable journey to Costa Rica. Upon my return in 2017, I officially resigned from my position as a private banker at National Bank to concentrate on my passion project, *Dividend Stocks Rock*. Around that time, I also began overseeing my locked retirement account at National Bank, transforming it into a practical case study by investing 100% of the funds in dividend growth stocks.

At the start in August 2017, this account had a balance of $108,760.02, with no option available for additional contributions. Growth relied entirely on capital gains and dividends. My intention in sharing this portfolio is not to show off but to offer a transparent view into my investment management approach—complete with positives and obstacles—so that others may learn from my experiences.

### **Portfolio Performance: December 2, 2024**
Let’s start by examining the main performance metrics:

– **Initial investment (September 2017):** $108,760.02
– **Current portfolio value:** $304,862.41
– **Dividends paid (TTM):** $5,078.34
– **Average dividend yield:** 1.67%
– **Performance in 2023:** +20.69%
– **Benchmark comparisons:**
– SPY (S&P 500 ETF): +26.19%
– XIU.TO (TSX 60 ETF): +11.87%
– **Dividend growth (2023):** +1.7%
– **Total return since inception:** +180.03%
– **Annualized return (since Sept 2017):** 15.45%
– **SPY annualized return:** 15.12%
– **XIU.TO annualized return:** 11.31%

This remarkable growth strengthens my belief in a disciplined dividend growth investment strategy.

### **Streamlined Yearly Portfolio Review**
While I refrain from obsessively tracking my portfolio, I perform an annual review during the holiday season to pinpoint necessary adjustments and prepare for the coming year. For those interested in establishing a similar process, here’s my method broken down into four straightforward steps:

#### **#1: Define Your Investment Rules**
Before getting into portfolio modifications, establish clear and actionable investment guidelines that resonate with your financial objectives. Here are my rules (as an *example*):
– 100% equity allocation (50% U.S., 50% Canadian exposure).
– No more than 20% allocated to any single sector.
– Stock positions should represent 2%-10% of the portfolio.
– Invest in companies with strong growth, solid financials, and sustainable dividends.
– Avoid companies that reduce dividends.
– Hold between 30 to 40 stocks, with a maximum of 10% allocated for speculative investments.

Clear and actionable rules facilitate efficient annual reviews.

#### **#2: Analyze Asset, Sector, and Stock Allocations**
Utilizing the global view dashboard from *DSR PRO*, I evaluate:
1. **Asset Allocation:** Maintaining a balanced split between U.S. and Canadian equities.
2. **Sector Allocation:** While I have a slight overexposure in technology (23.8%) and financials (22.99%), I ensure that no single sector dominates my holdings.
3. **Stock Allocation:** I examine the largest and smallest holdings. For example, Apple (9.64%) is my largest holding, while smaller positions like Canadian National Railway (1.19%) and Toromont Industries (1.33%) might require reinvestment to align with my allocation goals.

#### **#3: Summarize Quarterly Reviews**
Throughout the year, I conduct quarterly portfolio reviews utilizing *DSR PRO*. This includes monitoring earnings summaries and noting any deviations from my investment theses. Companies like Alimentation Couche-Tard, Starbucks, and Texas Instruments, which show mixed metrics, are marked for further analysis.

#### **#4: Deep-Dive Analysis for Specific Stocks**
Not every position needs an in-depth review, as careful research done at the time of purchase holds significance. However, I meticulously evaluate stocks flagged with yellow (rating of 3) or orange (rating of 2) indicators in my portfolio.

For example, after analyzing Texas Instruments, I opted to divest my position due to its declining dividend triangle and my slight overexposure in the technology sector. Proceeds from the sale will be directed toward underweighted holdings.

### **Smith Manoeuvre Portfolio Update**
The *Smith Manoeuvre* portfolio, steadily constructed through monthly contributions, now encompasses 12 dividend-paying firms across 8 sectors. As of December 2024, the portfolio’s market value reaches $16,380.69, with an average yield of 3.84% and a 5-year dividend CAGR of 9.29%. A recent acquisition includes two