How to measure dividend growth of a portfolio still adding funds to

[Excel35]

Hi,

What methods do you recommend for measuring the dividend growth of a portfolio that I'm still adding new funds to?

Ideally, I'm looking for something simple that I can do at the year-end (or keep on top of a couple of times during the year).

If you measure your own dividend growth, do you include special dividends or keep them separate?

Thanks
Excel35

[Raptor]

Moderator Message:
Not a strategy question. Moving to Financial Software with a "shadow" left on High Yield Strategy. Raptor.

[kempiejon]

I record a rolling 12 month amount each month end, this is a new addition as I hopefully reach the end of my re-investing and new money period. Prior to that I used to record just an annual income amount. I have an annual income target figure in mind, new money and reinvested dividends will get me there but I do not scrutinise how I'm getting there, I try to buy at above current portfolio yield and keep an eye on this figure and once bought I so infrequently sell I'm less concerned about my holdings yields.

My method does not account for new money - here I'd expect you'd want a unitised port to drill down the nitty gritty. I never bothered and wouldn't contemplating back dating it, one could start from today I guess. I do a total return IRR calculation and I take a snapshot rolling yield every now and again. Dividend drag from new buys not yet delivering income will lower this figure but as the port grows this effect diminishes and for me good enough will do.

[StepOne]

What methods do you recommend for measuring the dividend growth of a portfolio that I'm still adding new funds to?

Ideally, I'm looking for something simple that I can do at the year-end (or keep on top of a couple of times during the year).

If you measure your own dividend growth, do you include special dividends or keep them separate?

I only do a year on year comparison. This year I added National Grid. So, when it comes to comparing 2016 to 2017, I will ignore any dividends received from NG. in the 2017 figure. (I may need to do a similar thing when doing the 2017 to 2018 comparison if I don't get both interim and final in 2017). That way I'm always comparing like for like.

It can get complicated if you are re-investing all your dividends, and regularly adding new holdings and topping up existing ones. If that's the case, then why not just look at the absolute increase and not worry too much about where it came from? Or you could do a rough and ready calculation as follows; If you have a portfolio yielding 4.5%, and your dividends increase by 10% from one year to the next, then you can work out that 0.45% of the 10% was due to re-invested dividends. You can subtract the effect of new funds in a similar way. E.g. If you added 2,000 to a portfolio with an average value of 50,000 over the year, then that's another 4% of 10% = 0.4%. So subtracting 0.45 and 0.4 from 10, gets you to 9.15% due to dividend increases.

I include special dividends in with the regular payments.

StepOne

[StepOne]

What methods do you recommend for measuring the dividend growth of a portfolio that I'm still adding new funds to?

Ideally, I'm looking for something simple that I can do at the year-end (or keep on top of a couple of times during the year).

If you measure your own dividend growth, do you include special dividends or keep them separate?

I only do a year on year comparison. This year I added National Grid. So, when it comes to comparing 2016 to 2017, I will ignore any dividends received from NG. in the 2017 figure. (I may need to do a similar thing when doing the 2017 to 2018 comparison if I don't get both interim and final in 2017). That way I'm always comparing like for like.

It can get complicated if you are re-investing all your dividends, and regularly adding new holdings and topping up existing ones. If that's the case, then why not just look at the absolute increase and not worry too much about where it came from? Or you could do a rough and ready calculation as follows; If you have a portfolio yielding 4.5%, and your dividends increase by 10% from one year to the next, then you can work out that 0.45% of the 10% was due to re-invested dividends. You can subtract the effect of new funds in a similar way. E.g. If you added 2,000 to a portfolio with an average value of 50,000 over the year, then that's another 4% of 10% = 0.4%. So subtracting 0.45 and 0.4 from 10, gets you to 9.15% due to dividend increases.

I include special dividends in with the regular payments.

StepOne

[kempiejon]

Re specials sometimes I do if they are real special lumps of extra dividend income, like I have with some house-builders recently and Admiral for several years but if they accompany a share consolidation or other corporate action I'd usually exclude from income as sometimes the special is a return of capital rather than paid out of surplus income.

[tjh290633]

The real answer is unitisation. Alternatively you can keep a record of the dividends declared by each share in each year (calendar, fiscal or company, the choice is yours) and compare each year with the previous one.

TJH

[nmdhqbc]

i just recently started unitising my portfolio for total returns (i.e. acc units). It doesn't tell me about dividend growth though. Just thinking in text here - would I need to to unitise the inc. units for this? And some how work out what unit price each dividend is. I think I can kind of make my way there but is there any good "how to" guides out there for this?

[Excel35]

The real answer is unitisation. Alternatively you can keep a record of the dividends declared by each share in each year (calendar, fiscal or company, the choice is yours) and compare each year with the previous one.

TJH

I presume you mean income units? Am I correct in thinking I need to know the total portfolio value of shares and also cash each time I receive a dividend? (if so, far bit of work if I consider back dating even a year).

What was the primary reason you monitored income units for your HYP? How do you find it most useful? (Just checking I'm on the right path and its worthwhile for myself as well as being clear on the main reasons it's beneficial).

I've been meaning to look into possibly doing accumulation units, which at a glance appears a lot simpler than income units, only needing to know the portfolio values on days new money is added/withdrawn to the portfolio.

(Spreadsheets etc are not really my comfort zone, but as time goes on, I'm keen to know how my portfolio really is performing).

Thanks

[tjh290633]

Essentially income units, yes, although the income attributable to accumulation units will give you an indication of how the cash from dividends is growing, just because it is rolled up in those units.

I work on a monthly basis, adding up the dividends received in each month, then dividing them by the unit price at the end of the previous month to work out the number of new units bought. If I have withdrawn cash, then I deduct that from the dividends. If that figure is negative, then I have sold some units. I appreciate that I should use the unit price at the end of the month, but it is near enough for my purposes, as the shares will usually have gone XD at the latest in the previous month.

Why did I start? I tried other methods of adjusting the index to get a reasonable measure of performance against the index, but it was very inaccurate, so I set about unitizing.

TJH

[Excel35]

Please excuse the silly question, but I'm having trouble working out how income units help me determine the increase in dividends of the portfolio as a whole.

Am I right in thinking Accumulation units measure the total return of the portfolio (and can be compared to a benchmark such as Ftse 100 total return index).

BTW where is the best place to get the Ftse 100 total return index figure on a daily basis?

Secondly, income units measure the performance of the portfolio minus the income which is paid out? Hence, would be benchmarked against an index such as the Ftse 100.

So between the 2, how do I get a measure of the actual increase in income, ie the dividends?

(Unless I'm getting totally confused somewhere? There really isn't much on the internet either that explains income units).

While here, I do measure the XIRR of my portfolio. Would that be much different to the results given by Accumulation and Income Units?

Thank you in advance if you do find time to answer.
Excel35

[tjh290633]

First of all, the IRR should be identical, regardless of whether you use income or accumulation units. The cash flow is identical.

If you want to know the rate at which dividends in cash terms are growing, just add them up and compare them with the previous year. Alternatively multiply the dividend per unit by the number of units.

Regarding the FTSE 100 TR index, it is available on the FT website, under the heading World Markets at a Glance, but they have just started limiting access to those who pay a subscription. Previously all you had to do was register for limited access. You might be able to find it via Google, but I was not successful.

TJH

[ADrunkenMarcus]

Regarding the FTSE 100 TR index, it is available on the FT website, under the heading World Markets at a Glance, but they have just started limiting access to those who pay a subscription. Previously all you had to do was register for limited access. You might be able to find it via Google, but I was not successful.

Try this (alter the date as needed...it should give the most recent one regardless):
http://markets.ft.com/Research/Markets/ ... 30/12/2016

Best wishes


Mark.

[forrado]

Am I right in thinking Accumulation units measure the total return of the portfolio (and can be compared to a benchmark such as Ftse 100 total return index).

You are indeed correct in thinking that.

BTW where is the best place to get the Ftse 100 total return index figure on a daily basis?

The source I use is the indices page on Trustnet at …
https://www2.trustnet.com/stock-market-index
(Updated daily and calculated on a total return basis over previous periods of 1m / 6m / 1yr / 3yr / 5yr)

Secondly, income units measure the performance of the portfolio minus the income which is paid out? Hence, would be benchmarked against an index such as the Ftse 100.

Not on a capital return basis generally speaking. The practice of benchmarking against an index tends to always be on a total return basis unless expressly stated otherwise.

So between the 2, how do I get a measure of the actual increase in income, ie the dividends?

Free access to such historic dividend data for open-ended funds is not generally made available to the private investor. It’s my understanding that The Investment Association (IA), the trade body for open-ended funds, holds that information and sells it to IFAs and the like. However, Trustnet records two years of dividend payment data for both open and close-ended funds that are subscribing members to the service.

For example: The Z Income units of the Jupiter Income Fund at ...
https://www.trustnet.com/factsheets/o/k ... rust-z-inc
(The Z Inc and Z Acc being the two clean share classes of the Jupiter Income Fund available to the DIY retail investors using execution only platforms)

Once page is open, click on the “Dividends” tab to view the relevant information for the past two years.

(Unless I'm getting totally confused somewhere? There really isn't much on the internet either that explains income units).

No there isn’t, because it’s not really in the interests of fund managers running open-enders to periodically distribute income to unit holders in the form of standalone cash payments. Rather, it’s more beneficial to retain income within a fund and issue unit holders with accumulation units. That way the fund can use the retained income to meet unit holders’ redemption calls while, at the same time, increasing the size of the fund which in turn enhances the annual management charges. This would not be possible if income was paid out direct to unit holders in the form of cash.

[nmdhqbc]

I feel like I'm trying to work out the same stuff as the original poster so some comments (probably not answers though)...

If you want to know the rate at which dividends in cash terms are growing, just add them up and compare them with the previous year. Alternatively multiply the dividend per unit by the number of units.

I don't think this would accurately take into account outflows or inflows of cash into the portfolio. If in one year you add £10k of shares earning £400 of dividends that extra £400 would not be the portfolio holdings growing dividends it would be the extra cash earning extra dividends in the now bigger portfolio.

Forrado - your comments appear to be coming from the perspective of finding info on a fund. I think the OP is asking about monitoring his/her own portfolio in the same way.

Excel35 - What I've figured out is that in unitizing the acc or inc units part of it is being able to identify the dividend per unit each time a dividend is paid. With the acc units however the dividends will compound. Extra dividends on top of the previous dividends. By unitizing the inc units the dividend per unit you calculate is just the growth in the dividend of the portfolio. i.e. growth in dividend if you spent all the previous dividends instead of re-investing them.

I've not started to try it yet but I figure it's similar to unitizing acc but instead of reducing the number of units when you take cash out you reduce the unit price. And each time I take cash out I'll add a calculation of (outflow) / (num of units) = Dividend per unit. I figure I'll add it up each time I pay myself and each year compare the total Divi per unit of the inc units.

[nmdhqbc]

I guess for the inc units to be accurate all dividends paid within the portfolio need to be paid out. At least in the unitization calculation if not in real life. I'm really just thinking out loud here and confusing myself.

[tjh290633]

I guess for the inc units to be accurate all dividends paid within the portfolio need to be paid out. At least in the unitization calculation if not in real life. I'm really just thinking out loud here and confusing myself.

No, you can buy more units with them. Sell units if you withdraw cash.

TJH

[tjh290633]

Regarding the FTSE 100 TR index, it is available on the FT website, under the heading World Markets at a Glance, but they have just started limiting access to those who pay a subscription. Previously all you had to do was register for limited access. You might be able to find it via Google, but I was not successful.

Try this (alter the date as needed...it should give the most recent one regardless):
http://markets.ft.com/Research/Markets/ ... 30/12/2016

Best wishes


Mark.

That link works, but changing the date to 01/12/2017 fails. error retrieving documentRetrieve failed

TJH

[nmdhqbc]

I guess for the inc units to be accurate all dividends paid within the portfolio need to be paid out. At least in the unitization calculation if not in real life. I'm really just thinking out loud here and confusing myself.

No, you can buy more units with them. Sell units if you withdraw cash.

TJH

They'd have to be paid out first though right? ie. the unit inc price would need adjusting down to account for them going out. Then if they are re-invested later they buy new inc units. And the sell units if you withdraw cash bit is for the acc units isn't it.

[tjh290633]

No, you can buy more units with them. Sell units if you withdraw cash.

TJH

They'd have to be paid out first though right? ie. the unit inc price would need adjusting down to account for them going out. Then if they are re-invested later they buy new inc units. And the sell units if you withdraw cash bit is for the acc units isn't it.

No. Let's say that you have £300 of dividends accruing in a month. You want to withdraw £500, so you sell income units equal to £200 to make up the difference.

Likewise if you pay in £1000 one month and have £300 of dividends, then you buy units to the value of £1300.

The big question is, what unit value do you use? You could work it out for that day but it gets complicated if your calculation for that day uses the new number of units. I prefer to use the last recorded unit value, which would be the end of the previous month. Otherwise you end up with circular calculation errors.

TJH