When I first calculated the growth rate of my portfolio I was quite pleased with the results. I didn't keep as good of records as I should have so I only have the total overall weighting of the dividend growth rates for my portfolio. Back in January 2013, my portfolio was much smaller but the weight dividend growth rate was pretty solid at over 11%. As of February 16th, here's where the dividend growth rates sit for my portfolio.
All growth rate periods and the weighted growth rate period are over 10% which is awesome, especially since I use just a 5% dividend growth rate in my projections to reach FI. Even better is when you consider the fact that the average YOC of my portfolio at the time of the original post last year was just under 3.00% and now it's around 3.50% with a current yield of 3.10%. Throughout the year I was able to increase both the yield and the dividend growth rate which is fantastic. I purchased a solid mix of higher yield companies, mainly REITs, and some higher growth rate companies like Visa (V). I feel that a solid dividend growth portfolio will have a good mix of companies across the yield and growth spectrum from the higher yield companies (5%+ yield, 3-6% growth), the sweet spot companies (3-4% yield, 7-12% growth), and the high growth companies (1-2% yield, 15%+ growth).
The actual growth rates for the 3, 5 and 10 year periods should be higher though as some of the positions I own (KMI, PM, PSX, LO, V, ARCP) weren't around 10 years ago or don't have dividend growth streaks that long yet. So it's factoring in 0% growth rates for their respective missing years. If I put in a 6% growth rate for each of the missing years the weight growth rates increase to 12.66%, 12.32%, 16.23%, 11.63%, and 12.59% which looks pretty good.
Overall I'm very happy with the way my portfolio is currently constructed in terms of yield and dividend growth. Since these are all historical dividend growth rates, I don't expect to see my portfolio continue to crank out 12%+ growth rates for decades on end but things look very good for 7-8% overall dividend growth in the long-term.
How do you calculate the dividend growth rate of your portfolio? Are you looking to add more high yield, sweet spot, or growth companies to your holdings?
**Thanks to All About Interest for showing me the error of my ways. Instead of calculating based off the portfolio weight, it should be calculated on the dividend weight. Dividend weight is the forward dividends for each position divided by the total forward dividends. The weighting process remains the same. Values have been updated to reflect this change.