With the beginning of the New Year it is time to set the targets for 2021. I like setting challenging but achievable goals based on the strategy that I plan to deploy.
However, before diving into the 2021 targets let’s review how I did against my 2020 goals. I had 5 goals purely with financial focus and another 5 goals around structure and performance.
Financial Targets 2020
- Hit $100,000 of portfolio value!
My dividend growth portfolio net value at the end of 2020 was at $154,000. This means the stock value plus any cash less any open option contract values (The sold put options are registered as a negative value). Achieved!
- Increase projected annual dividend income (PADI) to $5,400
My PADI at the closing of 2020 stands at $7,092 and this is well above my original target. The $5,400 goal I actually already hit in June, however, with the help of using my margin. I injected enough money to pay back all margin outstanding by the end of 2020. Achieved!
- Earn $4,750 in dividend income
I received $5,844 in dividends during 2020 which averages to $487 per month, all reinvested. I currently do not DRIP as with my broker it is for all dividends or nothing. As I do not want to buy stocks which I do not consider undervalued I have switched this option off. Achieved!
- Collect and retain $5,000 in options income
My result from options is a big fat negative -$11,755. I got hit hard by the severe market drop in February and March with open sold put options for which I did not have sufficient funds. Hence, I received margin calls and in the end had to close almost all positions with a loss. From then I worked my way back up but still ended up with a realized loss of $11,755 for the year. Missed!
- Taxes clearance at the end of the year from checking account
I did a lot of investigation on what the best strategy is for my current stage of my dividend growth journey and I will close the year with about $20k in losses without any selling of positions which would lock in profits. The reason being that I expect to get paid significant amount of dividends over the coming years and that I plan to actually make profits on my options trading strategy. I can then offset these gains against my losses from this year. Achieved!
Non-Financial Targets 2020
- Employ the dividend stock screener before investing
With the market crash in March I actually did a serious deep dive into what the best long-term dividend investing strategy is and with the help of great articles from DivGro I build my own tracking shortlist to identify high quality dividend growth stocks and its valuation. I have also added a visual review with SSD safety score to track my progress. I also have my weekly Top-5 undervalued dividend growth stock post on Twitter which forces me to review the shortlist every week. I am happy with these tools. Achieved!
- Stick to the option rules
My rules were quite simple but the execution really hard. In short:
- Only expose up to 30% of the available margin: Missed!
- Only sell puts of stocks I am actually willing to buy: Missed!
- Only sell covered calls: Missed!
A triple miss! As a result I ended up having significant losses from options trading in 2020. I have now a better tracking of my exposure to avoid taking on too much risk. Still I think for normal market conditions, option premiums are a great source of income.
- Set up proper portfolio tracking
I did not manage to explore the software Portfolio Performance any further but I have improved my Excel tracker. Still, I need to improve my tracking to learn from the past and understand what works and what doesn’t. Missed!
- Maintain the blog with value articles
I did write my monthly dividend income articles and combined them with changes to my portfolio so that there was no need to add extra portfolio updates. I did not write stock analysis articles and have decided I will not do so in the future. As the year has been quite hectic I did also not include quarterly reviews. At the same time, I think I improved the quality of my monthly reports significantly and added a lot of detail. The main focus is still on dividend investing. I give a positive view. Achieved!
- Explore Interactive Brokers platform to full use
I am still using the mobile app for all of my transactions and have not come around to really test the trading platform on the desktop. Missed!
Conclusion for 2020
I met 6 out of 10 goals and 4 out of my 5 financial ones. However, the triple miss on the options goal cannot be just swept under the rug and as such I must acknowledge that while having grown my dividend income and PADI, I incurred significant losses from options and this leaves me with a bitter taste for 2020.
New Goals for 2021
For 2021 I will again set both purely financial goals and more structural and performance oriented goals. In order to understand my reasoning, it is important to define the underlying assumptions.
Assumptions for 2021
A: Recurring capital deposits of €2,000 per month (€24,000 in 2021). As exchange rate vary over time (EUR/USD at about 1.22 at time of writing) this should add about $28,800 or $2,400 per month of fresh money.
B: Reinvest dividends, on average at least $600 per month (at least $7,200 in 2021)
C: Retain and invest options income (goal is $12,000 for 2021)
D: Assume initial yield on cost (YoC) averaging 3.0%
E: Assume an annual dividend growth rate of 5.0%
Financial Targets 2021
- Hit $200,000 of portfolio value!
With a portfolio value of about $154k at the end of 2020 and still being in a bull market, I should reach this goal easily given the fresh money coming in plus the base dividend income, options income and dividend growth.
- Increase projected annual dividend income (PADI) to $5,400
There are several layers to the increase of my PADI in 2020.
– Fresh capital invested $28.800 x 3% = $864 (A,D)
– Options income invested $12.000 x 3% = $360 (C,D)
– Dividends reinvested $7.200 x 3% = 216$ (B,D)
– Current PADI dividend growth $7.092 x 5% = $355 (B,E)
This all adds up to adding $1,471 to my PADI of $7,092 at the end of 2020 and leaving me with $8,563. Let’s make this a more manageable number of $8,600. This would be a growth of 21%.
- Earn $7,850 in dividend income
I count as a basis the $7,092 PADI at the end of 2020 plus half of the projected increase of the PADI for 2020 as the investments and increases come in gradually during the full length of the year. With my dividend income of $5,845 in 2020 this would make for an increase of 34%.
- Collect and retain (secure) $12,000 in options income
I failed to meet my rules in 2020 and definitely need to ensure the risk management. As such I think there should only be three rules:
- Only expose up to 100% of net portfolio value
- Only sell puts of stocks I am actually willing to buy
- Only sell covered calls
It is also important not to try to compensate for losses on the same stock, maybe it has run out of reach and there are better alternatives.
Non-Financial Targets 2021
- Employ the dividend stock screener before investing
As mentioned before, in 2020 I built already a tracker for high quality stocks and review the stock valuations. Out of the shortlist I than do further checks on applying simple rules:
- Invest only in fair or undervalued stocks, if growth evaluate growth potential priced in
- Check FastGraphs
- Check expected Earnings Yield
- Check P/E ratio (preferably below 15 but depending sector and stock type)
- Check SSD score
- Check dividend growth history
- Check dividend yield history
- Payout preferably <60%
- Stick to the option rules
For options I have already stated what my rules are going to be for 2021 and it should really help me to stay focused on not taking too much risk. Nevertheless, because these rules are so important I will lay them out again.
- Only expose up to 100% of net portfolio value
- Only sell puts of stocks I am actually willing to buy
- Only sell covered calls
- Set up proper portfolio tracking
I think I need to first define what I want to track, then set it up in a basic sheet and save copies to capture the month end state of the portfolio. I will do so in Excel as it is the most versatile software.
- Maintain the blog with value articles
My target is to write regular dividend income and portfolio updates and add a complete portfolio review once a quarter checking how I am doing against my targets.
- Explore Interactive Brokers platform to full use
This is the new brokerage firm I will be using from now on and still need to explore how their platform works to make full use of it.
Conclusion for Goals 2021
This is my plan for 2021 and the ground rules I ought to adhere to. 2020 has been a crazy ride and I want to keep it calm in 2021.
I reduced the targets from 10 to 9, and still focus on both financial and non-financial goals. The quality of my dividend growth portfolio is the key to long-term success.
I believe having such a detailed plan of goals for my dividend growth journey will ultimately help me achieve my overall goal of financial independence. I am happy to see the progress I am planning on making in 2021. Happy investing!
Disclaimer: I am not a professional investment or financial advisor. The information presented on this site represents my personal dividend growth journey and it is for informational purposes only. Opinions expressed are my own and should NOT be relied on or taken as investing advice. I have no knowledge about your personal situation and before you make any investment decision you should exercise due diligence and must do your own research. Always consider seeking advice from a professional financial and tax advisor.