Year 2009 Dividend Portfolio Goals

This is the first time I will be making my investing goals public. In addition, I also plan to provide quarterly reviews on how I am making progress. My dividend portfolio consists of two investments buckets. One bucket consists of dividend stocks, and the second bucket consists of dividend ETFs/CEFs. Since both of them provide dividend cash flow, I review both in combination (and not standalone). The standalone analysis is used during the asset allocation and/or diversification analysis.

In order to establish my goals for 2009, first I will present the current state of my dividend portfolio. It will form the baseline on which I will continue to build my portfolio. The table above shows my existing 2008 year end portfolio parameters. The portfolio has:

(1) $1358 per year as dividend cash flow;

(2) Yield on my original investments (YOC) is 5.17%;

(3) Lost 19% of the value (relative to loss of 38.61% in S&P500); and

(4) Personal rate of return (XIRR) as -9.0%

In the prevailing economic environment, companies are showing reduced earning, paring down growth plans and expenditure, and slashing and suspending dividends. Not only that many companies are not able to look forward and predict their own earning expectations. To me, not able to put an expectation is a sign that management is either not able to plan (clueless?) or not sharing the true state of their business. I do not see any economic drivers that, at least in first half of 2009, will make market go up. I anticipate that Year 2009 will continue to show pessimism with occasional burst of optimism. As dividend based investor, I can invest in some really good companies at bargain prices.

In first few initial years, my focus is on accumulation based on divided cash flow. Therefore, my dividend cash flow driven target is as follows:

(1) Generate dividend cash flow of $3000 per year (currently at $1358).

(2) YOC will get affected because it will be based on my initial buy price. One argument is markets would drag down the price, while the other argument is that demand-driven dividend companies would be at higher price. Additionally, I will need to balance initial yield vs. risk to dividends. With this contrasting perspective, I am anticipating my YOC will drop down below 5.0%. I will target it not to drop below 4.5%.

(3) XIRR and value is something that I keep track for relative comparison. My preference is to keep both parameters on the positive side and keep my portfolio value better than S&P500. Unfortunately, I do not have any direct control over it. I will invest in good companies and hope that Mr. Market will do the rest.

In addition to these tangible targets, I have few other intangible areas of portfolio management that I need to continue to work on. These are:

(1) Manage asset allocation and diversification from risk-to-dividend viewpoint; and

(2) Invest in international dividend paying companies.

For me, the challenge in these targets is to be able to provide sufficient funding and balancing dividend risk versus initial yield.

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