How sustainable is your investing?

The Black Live Matter protests are shining a light on racism, and police brutality. Which both feel quite a long way from the topic of this blog. But as I reflect on them I realise that I have never really discussed any ‘purpose/values’ driven investing. So here goes.

I notice my age increasingly frequently these days, especially at work – where I am almost the oldest person in a young, dynamic, London workforce.

The non-silicon side of Old St Roundabout

Where I am aligned with my workforce is that we are all, by the main, modern, liberal, decent Londoners. I don’t believe anybody I work with is a racist, or a sexist, or somebody who would wilfully harm the environment.

Nonetheless, my younger colleagues definitely differ from me in how they put values front and centre; they crave a ‘purpose’, and they embrace their purpose/values in much more of what they do. So, for instance, to the extent they manage their investments they would be much more likely, I think, than my peers to look for ‘socially responsible’ investing – or Environmental/Social/Governance (ESG) investing.

Why ‘socially responsible investing’ never appealed to me

When I started my investment journey, over twenty years ago, any ‘environmental’/similar investing was, to put it charitably, a niche sport. The range of investments was very limited, and it was assumed that the returns would be mediocre. Fees were high. I was not attracted to it.

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Why the market’s about to drop – and what I’m doing about it

This time is different.

We’ve been at market highs before. Staring at unprecedented multiples, unhinged presidents, central bankers finally increasing rates, comedians winning elections in G8 economies, the first serious trade wars in decades, and more.

We’ve heard how a big drop is imminent before. We’ve muttered, whispered, tutted, gawped and clicked our tongues.

Yes, as we predicted those times, market corrections often followed soon after (except, just a couple of times, when they didn’t).

But this time really is different.

This time my portfolio is running red hot, at a new high water mark.

Amazon’s just crossed $2000/share. $2000, per solitary share.

Apparently US company earnings are falling, and, not unsurprisingly if so, dividends are heading down. This hasn’t happened before, since, well, just before the last market correction/crash/similar.

In the UK, the (120,000) people have spoken and we have a new Prime Minister. And Brexit no deal/etc looming on Hallowe’en’s day. As if the world economy wasn’t giving us enough to think about.

So, obviously, now is the time to run for the hills.

Image result for hills in london
Head for the hills! If you can get a spot – this is London after all.

Which hill to run to?

Continue reading “Why the market’s about to drop – and what I’m doing about it”

My Dividend Growth Portfolio: a review

One small portion of my invested portfolio is run as a ‘Dividend Growth Portfolio’ (DGP).  I kicked off this portfolio in early 2013, and have run it pretty consistently ever since.  It’s time for my first ever ‘deep dive’ into how this portfolio has been performing.

The strategy: buy growing dividends

I didn’t document  my exact strategy for this portfolio at the time, but it has been something along the line of this:

To own Dividend Champions, and their ilk, with a strong likelihood of growing their dividend over the short and long term.

I have been a longtime admirer of the Dividend Champions, who are the ~100 publicly listed US companies that have raised their dividend for 25+ years in a row.   The UK has hardly any companies that can boast of this track record, and the UK approach to paying dividends (interim + final, rather than 4 equal quarterly instalments) makes the UK fiddlier to monitor for shallow analysts like me.  I will certainly consider shorter track records than 25 years, such as the Dividend Achievers, Dividend Contenders etc, but for true quality you need Champions.

You will note that there is nothing in this approach that prioritises high yield payers.  In fact US companies tend to have lower yields than UK companies.  Much as I like dividend income, for this strategy I am prioritising predictable growth in dividends, not the level of dividend itself.

Leverage: a changing approach

This portfolio was one of my early uses of leverage, though in a very modest way: I used to leverage up the portfolio by one to two year’s worth of dividends (i.e. 2-5%).  In late 2015 this approach changed as I leveraged up across the board to buy my Dream Home and by 2016 my leverage for this portfolio had risen to over 40%. As rates have risen, I have reduced my leverage, so right now the Loan to Value is around 30%, and I am in fact paying almost as much interest (~3%) as the after tax dividend yield of the portfolio.

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How the stock lineup has expanded over time

My initial set of about a dozen holdings comprised stocks like AXP, CAT, KO, MCD, T, VZ, WFC, with a smattering of IBM, GE in there too.  Sizing my positions has been very ad hoc.

Continue reading “My Dividend Growth Portfolio: a review”