One of my goals for 2012 is to grow my investment income by 20%. In an effort to achieve that goal I plan to track my projected 12 month investment income on a monthly basis. I currently am not planning on releasing my exact dollar amounts but instead will work on a percentage basis. What follows here is my first in the series of posts about the income generated. Sites that I follow like Million Dollar Journey and Dividend Growth Stocks have their Net worth update and Dividend income update
I will flesh out the methodology used for each income update as I progress. This tracks income across all my investment accounts as that is how I record and calculate it. It does not track savings and checking accounts nor does it subtract the costs of my debts. Most of the investments that are to be tracked are meant for long term investing purposes, however there are some portions that may be sold as a general re-organization of my balance sheet. If this happens in the future I will adjust accordingly. Methodology will be presented at that time.
Since this income update covers all my portfolios it includes income from 3 main sources. Stocks, Bonds and Cash. Unfortunately to complicate things parts of the income are generated from etf’s, and mutual funds this complicates matters because depending on the fund or ETF they do not always have consistent payouts throughout the year. To make matters worse some of my holdings are in foreign currency and therefore will be affected by currency fluctuations. All of this leads the tracking of income to be more volatile than I would like. There will be months where dividend income goes down even though no company has cut their dividend. Currently my Holdings only lists individual stocks which I own. It doesn’t cover every other investment. I may modify this in the future especially if I determine that I am posting about instruments other than dividend stocks.
Alright, enough of the small talk lets get into the data. Since my goal is to grow my investment income by 20% in 2012 this means I need to grow income at a monthly compounded rate of 1.53%. I plan to achieve this income growth through 3 methods: Dividend growth, New purchases, and changing my investment mix.
- Dividend Growth (+0.15%) During January one of my stocks
CNR.TOincreased it’s common dividend by 15% Also some different ETF’s changed their monthly payouts. Generally speaking the Bond ETF’s had slight decreases in their payouts and the stock ETF’s maintained or increased their dividend payouts.
- New Purchases (+0.06x) Dividends received from Northland Power
NPI-UN.TOand Algonquin Power Utilities
AQN.TOwere reinvested using a brokerage DRIP program (whole shares only) It is generally not my policy to enroll in drip programs
as I would rather reinvest all my dividends in stocks which I deem to be attractively valued when purchased, it also complicates tracking yield on cost, and book values. However with these stocks I have continued the drip because I still feel that my allocation is low for my current purposes.
- Investment Mix (+0.0%) This is where a large portion of my income gains should be generated this year however in January I did not make any changes to my overall investment mix. This will require transferring funds between accounts and finding new income generating investments which are attractively valued to invest in. Changing my investment mix achieves 2 main goals, 1. It causes investments in capital appreciation focused low income generating mutual funds to be replaced by income generating ETF’s and Stocks. 2. As I move a higher percentage of my holdings out of mutula funds the result is that the MER I am paying as a percentage of my total assets should fall. Sales of mutual funds which are transferred to my income strategy will be included here in future posts.
In conclusion my increase in income of only 0.21% During January was below my goal by a significant margin. Contributing factors include currency fluctuations, slow progress on identifying new investment opportunities to replace my existing none income holdings, and fluctuations in the payouts of the ETFs and bond funds. My trouble identifying investment opportunities stems from a strong run up in the stock market which has caused deteriorating value metrics I am hopeful that as the year progresses there will be some stock market corrections that will provide buying opportunities. Hopefully I will have more to report in my next income update.