With a full year of dividends behind us, I think it will be useful to look back on what worked and what didn’t. First, I was amazed that it wasn’t all that hard to build a True Daily Dividend Portfolio™. If I wasn’t writing the blog posts, it would be no more than an hour per week. Was it worth the time? Yes!
In 252 trading days, we made 250 trades. The two days we missed were both half day markets when no dividends were being paid by anyone. Our Internal Rate of Return (IRR) was 22.4% and our Time Weighted Rate of Return (TWRR) was 24.6%. Please see this post from last year for an explanation of the differences. It makes sense that the two different calculation methods converged at the end of the year once all the trades were complete. Depending on where you check, the S&P 500 returned 30.4% straight up and 33.1% with dividends reinvested. So, does this mean we did poorly? Not at all. The first thing to remember is that the gains in this portfolio are “realized”. This means we closed the trades and took the profits. The returns were not theoretical, they were real. With that in mind, had I held on to a couple trades in the last week of the year and sold them in January, the return would have been a percent or two higher. But, I wanted everything to be realized, so I had to pay a price.
Of the 250 trades, 230 of them were profitable, while only 20 were losers. We also closed out the year with a 6.2 profit factor. Again, please see this post if you don’t understand profit factor. Another interesting fact is that 45% of the profits were generated by capital gains while 55% came from dividends. This means we had significantly less volatility than a pure S&P 500 portfolio.
For the most part, I was happy with the trades, but there were a few that I wish I had done differently. A couple regional banks traded with such low volume that the spreads were quite large and hard to overcome within a short time frame. This means I had to wait longer in those cases before selling the stock just to get back to even. This year, I am checking the spreads prior to making a decision on whether or not to take the trade.
I’m very happy with the results and plan to continue this type of dividend investing into the future.