The portfolio has been running now for 19 months so it’s beginning to build up a track record long enough to pay attention to. In general I would say that looking at performance over anything less than 5 years is meaningless, but of course most people just look at the last year and in this case 5 years isn’t possible as the portfolio hasn’t existed that long.
From inception in March 2011 the portfolio is up 8.9% (including reinvested dividends), which is an annualised gain of 5.5%. This compares to a total gain of 6.6% for a FTSE 100 tracking unit trust, which is 4.1% annualised. Both portfolios are based on a starting value of £50,000 and trading costs are included.
The portfolio is focused on producing a yield which is higher than the FTSE 100’s and which grows at a faster rate. The most recent yield was 4.5% and the index tracker benchmark was at 3.3%. In the last 12 months the portfolio has produced 40% more income than the index tracker, which is a pay rise I would be happy to have any day of the week.
In terms of activity, over the past three months there have been three changes to the portfolio, which follows the existing plan of having one investment enter or leave each month. I’ll get straight on and review the first of these changes.
August purchase: A FTSE 100 listed UK energy utility
The portfolio already holds SSE (Scottish & Southern Energy) so this is the second energy utility holding. The reasons for investing in this company are much the same as they are for any of the portfolio’s holdings. This company has:
- A long-term growth rate of around 10% a year
- A dividend yield of almost 5%, well above the market average
- A long history of relatively consistent increases in sales, profits and dividends
- A strong balance sheet with low levels of debt
- A market leading position with strong branding and economies of scale
These are the kind of investments that I can own and still sleep well at night. There are risks of course, there are in all things –but for me this is equity investing at its least stressful.
My expectations for this holding are that not very much happens. The dividend should hopefully be raised at or above the rate of inflation, and at some point the…
