My annual blog post about some important metrics of my Vrijheid Fonds – 2019 Edition.
Since I started my blog, I asked myself, every year the same question about my Vrijheid Fonds, ‘What is my portfolio’s weighted average dividend growth rate (DGR)?’
In this blog post I did the original calculations back in January 2015 and for the posts in the following years, just click on the corresponding year 2016, 2017 and 2018.
Now it is time to look at the development of some metrics of my Vrijheid Fonds over the past year. Since May 2018 I made 7 new purchases so far (excl. mutual funds). And as of today my Vrijheid Fonds now consists of 26 stocks (excluded my mutual funds). Now let’s see how my weighted average growth rate and yield have changed since May 2018.
For all my individual stocks I have calculated the 3-year DGR. I use the 3-year DGR, because I think this give the most realistic long-term rate. And therefore, it is a good indicator for future performances. Of course, I look at the full data set of all my stocks to see if there are irregularities. For this, I thankfully use the David Fish/Justin Law spreadsheet for the Dividend Aristocrats.
Data mining
After some data mining and some calculations, here are the results for 2019:
My weighted average dividend growth rate on my Vrijheid Fonds is at this moment 5.52%. My weighted dividend Yield is 3.49%. And my Beta is 0,564
# Stocks | DGR – 3 yrs | Yield | Beta | |
2015 | 13 | 6.92 | 3.66 | 0.685 |
2016 | 20 | 6.86 | 3.57 | 0.649 |
2017 | 21 | 4.45 | 3.20 | 0.717 |
2018 | 24 | 3.66 | 3.58 | 0.714 |
2019 | 26 | 5.52 | 3.49 | 0.564 |
If we look at these numbers, we can see that my weighted average DGR and Beta got better, but that my weighted average yield has slightly deteriorated :-(. Let’s look a little bit further why this is the case.
It is safe to say that the economy is doing well. Besides the increasingly better numbers companies are presenting in their annual reports, the stock prices are higher than last year. At this moment the market is spitting out new all-time highs every week. We all know that higher stock prices always mean a lower dividend yield (With equal dividend). And as long as my weighted average yield is above the inflation rate, I’m happy. Yes, this is still the case.
And because companies are making more profits, they are rewarding us with higher dividend increases, so that is why my weighted average Dividend Growth Rate is improving.
The latest addition to my Vrijheid Fonds were also companies with higher DGR than my Vrijheid Fonds at that moment. The DGR was one of the selection criteria I have used to select new additions to my Vrijheid Fonds. So, my actions have led to the desired result!
My Beta also shows a decrease and is (still) below 1, which is good. This was also one of my selection criteria.
What does it all mean?
Now that I know all this, let’s play around with these numbers a bit.
As I mentioned my weighted average dividend growth rate on my Vrijheid Fonds is 5.52%. And, my weighted dividend Yield on my Vrijheid Fonds is 3.49%. We can use this numbers to calculate how much my income could essentially grow without doing anything. 😉 Of course, this new metric can be used as an expectation.
For 2019 I have a projected income for my Vrijheid Fonds of € 4,031. This means that approx. € 193 will be added in the next 12 months, just by doing nothing. That sounds good!
I think this is a great way of looking at my Vrijheid Fonds. Imagine what the numbers will be if you do this for more than 20 years. So, this shows again thatbuying stocks earlier in your life (and consistently keep adding stock each year) makes that the 8th wonder of the world (compound interest) has a giant impact on the value of your portfolio.
I use these metrics also in my decision making for new purchases. I will use these metrics together with my Pollie-code to determine the buy-worthy of a new stock. And yes, preferably a new stock has a better DGR-3 year than my current weighted average DGR 3-years.
Do you calculate your weighted average DGR and Yield? Do you use it in your decision-making?
Please leave a comment; I am looking forward to it.
Thank you for stopping by and taking the time to read my post.
Cheers,
Pollie
No I didn’t so far. Quite nice to do sometimes. How do you include the weight? Is that the current value of your portfolio or the original investment?