Evolution of my Investment Portfolio over the year
Who would have thought that 2017 would show such an amazing Stock Bull Market?
The Dow Jones Industrial is up 25 %, the broader Standard and Poors 500 Index gained almost 20 %. All around the globe indices have experience a nice increase between 15 % and 25 %.
Just looking at my investment portfolio shows a similarly nice development: Early in January 2017, the market value of my share holdings was around USD 115’000. Now, it stands well above USD 170’000.
Taking into account investments I made in 2017 and reinvestments of dividends, there is a nice book price increase of around 25 %.
Over the last twelve months I focused on giving my portfolio an even more defensive shape, investing pretty heavily in consumer staples. But I also entered into positions of a car maker and one insurance company. From January to November 2017, I’ve added stocks of following strong businesses to my investment portfolio:
- The J.M Smucker Company
- Imperial Brands
- Bayerische Motoren Werke AG (BMW)
- Henkel AG & Ko
- Reckit Benkisser
- Legal & General
I expect these seven companies to provide at least USD 600 in dividends in 2018 and that amount to incrase quite nicely over time. For next year, I target a passive income of at least USD 6’000.
A raging bull market is nice in terms of capital appreceiation, but as a dividend growth investor I focus on attractive entry prices and after a purchase is made, all I want is watching the passive income stream from the company grow over time.
High stock prices make new investments expensive and more risky. So I have been pretty selective. But still, compared to the previous two years, the invested amount into new positions (over USD 29’000) is quite substantial (in 2016, I invested around USD 16’600 in Coca Cola, Diageo, Bayer, Walt Disney, HSBC).
Savings rate boost fuels our investment process
We were able to put a significant amount of money to work by steamlining our financials and increasing our households’s profitability. Our savings rate got a nice upbeat from 57 % in 2016 to over 65 % for the current year.
We are pretty happy with our financial achievements giving us tremendous flexibility in our life, enabling us to invest to build up an ever growing passive income stream and speed up our way towards Financial Independence.
Over the last few years, we’ve also accumulated a nice cash pile giving us ample opportunities e.g. to take advantage when there is a significant stock market retreat to boost our passive income even further. We love shares of excellent businesses, and we like them even more, when their prices are down!
We are also constantly on the lookout for real estate projects.
As we are committed to a constant investment process, we are always prepared to pull the trigger when we feel that we get good value for our money. So, in the last days of 2017, I decided to make a final share acquisition and pick some pieces of one more strong company.
Finding value in British insurer AVIVA
In December, I acquired 500 stocks of AVIVA at a price of slightly below GBP 5 putting the invested amount in 2017 for new positions to over USD 29’000.
It’s the fourth position in the insurance sector together with Zurich Financial, Swiss Re and Legal & General, but still the exposure of my portfolio to that industry is rather moderate.
AVIVA really is one of the high profile companies in the insurance sector I’ve had an eye on for some years.
AVIVA is a massive business with a long history. Did you know, that that British insurance giant is over 320 year old?
Stockholders had a tough time over the last years, especially in 2012, when the CEO had to resign amid falling revenues, eroding profits and a plummeting stock price. After Mark Wilson took the helm at the company and the dividend was cut in 2013, the share price took another dive.
But then, slowly and steadily, the company returned to the path of decent growth with improved top- and bottom line results. The stock price has significantly recovered.
In my view, Mark Wilson has done a terrific job so far, turning the company around. Profitability has improved, the business is paying down debt and I wouldn’t be too surprised to see Free Cash Flow climbing significantly over the next 24 months.
In my view, there’s a lot to like about AVIVA. Given the attractive valuation and an interesting mix of high yield and a moderate risk profile, AVIVA is definitive a company that fits into my investment portfolio.
Do I consider financial shares like AVIVA, Legal & General or HSBC as perfect investments to build the backbone of a conservative portfolio of a dividend growth investor?
My answer would be: “RATHER NO THAN YES”. Don’t get me wrong: AVIVA, Zurich Insurance, HSBC or Legal & General are very solid financial institutions and cash machines. They are nice income plays if acquired at an attractive price. But their risk profile differs from defensive companies such as Coca Cola, Nestlé, Heineken, Unilever, Henkel, ReckitBenkisser, J.M. Smucker, Novartis or Roche. You want to see such enterprises as your core holdings. Their business models show an amazing resilience towards recessions and these companies have the financial strength, ability and discipline to increase dividends even when times are tough. You want to watch these cash inflows grow year by year and selectively buy some higher yielding stocks to “spice things a bit up”.
With regard to AVIVA, I see my forward Yield on Cost well above 5.5 % and I expect that position to add around USD 150 in annual dividend income. The company offers a Dividend Reinvestment Plan (DRIP) and I am looking forward to seeing my stock count grow nicely over the years.
What about you, fellow Reader? Any nice stock picks made in 2017? Have you AVIVA in your portfolio or other insurance shares? What do you think about my stock acquisitions?
Thanks for reading and sharing your thoughts.
You are responsible for your own investment and financial decisions. This article is not, and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.