Note: Due to the Easter Holiday, there was a delay in the posting of several dividends and interest to tally month and quarter end. Therefore, the monthly report will appear next week.
A journey of a thousand miles begins with a single step
Attributed to Chinese philosopher Lao Tzu
This encapsulates the feelings I have as I wrestle with control of the portfolio. Over the years, I’ve embraced various styles of investing with various degrees of success. I’ve also embraced multiple upstart apps attempting to disrupt the brokerage status quo. From Loyal3 to Motif and Webull to M1 Finance – been there, done that. Buying what I love to thematic investing diverted my focus resulting in a motley assortment of disassociated holdings, albeit strung together by migrating strategies.
The end result was a portfolio peaking out at 223 companies in 2018. The rule I basically followed was 60/40 – 60% towards the regular portfolio and 40% to the others. The ‘others’, of course, being the item of the day. From my bank M&A strategy of 2017/2018 to the Coca Cola bottlers, blockchain ending with the SPAC craze – I came to realize that with more information and collaboration, the result is diminishing returns as you are living for the home runs to bail out the also-rans.
So, I’ve been retrenching by consolidating my accounts at Schwab – Webull in 2022 and M1 in 2023. The thought process similar to Ken’s epiphany at Simple Dividend Growth.
I also began the slog in reducing the number of holdings. Do I really need exposure to all six of the largest Canadian banks? Which strategies have played out? And more germane today, those which have dividend growth worse than the rate of inflation?
As such, my portfolio has been on a gradual decline in the number of issues held, entering 2024 with 147. My mantra is currently fewer, but larger positions. Last week I sold the Independent Bank Group (IBTX) position as their last raise was 5.5% in 2022. They’ve also been active soliciting deposits via brokered CDs at rates greater than 5%. Not a good sign – but I did exit with a small profit after 9.3 years.
You could say Engineering Dividends (ED) is further along in his endeavor, but he is encountering similar issues – therefore, he’s retrenching a little by taking smaller bites of this apple. To compare, his goal is to get to a minimum 1% weighting on all his holdings with a 59-stock portfolio. I too would like to accomplish this, but I’m coming at it with about twice the problem (147 stocks). By comparison, 117 of mine (79%) fail the 1% test with 90 failing the 0.5% test.
I did update my Inflation Beaters spreadsheet during this exercise (adding 2024) as I look at two additional factors over EDs, Dividend Growth (longevity and degree). I’m pleased that all my divestitures over the past few years were resident in, what I call, the ancillary camp – less than 1%. The realization also hit home that any percentage threshold is pretty much meaningless while I’m over 100 holdings. The update also illustrated that for the last two years (for my portfolio at least), dividend growth has slowed from 11.4% to 9.3%. Not surprising as I anecdotally presumed as such – which provides greater impetus to this project. For the moment, I’ll continue with my current path with the priority attached to the companies with stagnant dividend growth. I will add to the positions that are underweight or the shareholder friendly dividend growers.
Essentially minimal changes on deck, but I find it’s always good to perform periodic validation to the thought process.
Have a good week!
Seeking Returns 