After sharing my love for spreadsheets when forecasting projected annual dividend income, it should come as no surprise that I have recently been tinkering with my dividend portfolio spreadsheet.
While doing so, I was reminded of Sheldon Cooper’s “Fun With Flags” scenes on Big Bang Theory and therefore I bring you…
Fun With Charts.
Did everyone else just see the fireworks and hear the bells and whistles?
If not, please know that I feel a little sad for you as you’ve yet to embrace the joy of spreadsheets; but enough of that, on to the fun stuff!
Changing Perspective on Dividend Portfolio
Since I started my dividend portfolio in May of last year and built my core set of holdings, I have been focused on adding to positions that have attractive entry points.
Not only that, but I have been making a concerted effort to build the portfolio in as balanced manner as possible without letting any one (or more) position get too far overweight. Often times my dividend stock watch list will feature positions that are underweight as well in an effort to build those positions.
When looking at underweight vs. overweight positions it is done in the context of a percentage of the overall account value.
For example, if my account holds 25 stocks I would want each stock to represent no more than ~4.0% of the portfolio to keep each position equally weighted. If you held 50 stocks, each would represent approximately 2.0% of your portfolio.
Based on what I have seen, this is how many across the DGI community weight their portfolios.
But have you ever considered a different perspective?
Portfolio Weighting By Dividend Income
Another way to think about your portfolio weighting is by the percentage of overall dividend income rather than account value.
While in some cases this will result in very close weightings, there will definitely be outliers as it will be influenced based on the dividend yield and the dividend growth rate.
This got me to thinking and I started tinkering with my spreadsheet to see what I would need to do if I wanted each and every position in my portfolio to produce a given amount of dividend income on an annual basis.
Looking at it from this perspective, I pulled some data together and made a few calculations.
Now I have a chart that demonstrates how many shares I need to own if I want every position in my portfolio to produce $500 in annual dividends.
Taking that one step farther, I definitely want to understand how close I am to that goal of reaching a particular dollar amount in annual dividends for each position and included the number of shares I currently own for each position.
I’ve represented this information using the following formula:
Desired Annual Dividend / Current Annual Dividend = Shares Required
While the chart above gives a visual check on the progress towards the goal, the chart below represents the data in a slightly different format and demonstrates the progress towards the end goal.
Here you can see that there are two positions that have already exceeded the goal of $500 in annual dividends, and there is a third position that is quickly closing in on that milestone.
As I do love tinkering with forecasts, I made sure to create this spreadsheet and corresponding charts dynamic such that they will automatically update as the annual dividend changes–which in turn changes the number of shares required to reach the goal, my owned shares increase or decrease, or if I change my desired annual goal.
For instance, ideally I would love for each position to generate $2,000 in dividend income and now I can quickly see how close I am to that goal.
While we often times tend to look at our dividend portfolio from the perspective of the account value, I found it fun to twist things up and look at this based on how many shares are required to produce a set annual dividend.
I did not demonstrate this above but I also included a calculation to show how much capital I would need to invest at current prices to reach the goal.
Part of what I love about dividend growth investing is analyzing the data and constantly looking at different ways to track progress towards the ultimate end goal–which for me is covering our living expenses in retirement through dividends.
Sometimes that will produce things that turn out to be useful, and other times it will simply be some time spent having fun with charts.
What do you think about this view of a dividend portfolio?
Do you weight your portfolio positions based on account value? Or by the dividend income–or maybe both?
I look forward to hearing what you think.