One of the great advantages of dividend growth stock investing is that you don’t have to be a slave to your portfolio. You aren’t a day trader staring at charts on your computer all day long. You don’t have to check your portfolio daily, weekly or even monthly if you don’t want to. You can travel, work, play and live your life without worrying how your portfolio is doing or if their is something you need to be doing in your portfolio. In dividend growth stock investing we are buying high quality blue chip stocks which are many times the leaders in their industries. These companies have shown a history of growth and consistently growing dividend payments. We can sleep well at night knowing management is doing a good job running these great companies and our stock value will hold up nicely.
Buy and Hold Portfolio
So dividend growth stock investing can be referred to as buy and hold. Yes as a dividend growth stock investor I prefer to buy my stocks and ideally hold them forever as I collect ever growing dividends year after year from the companies I own. However, sometimes things change. The economy changes, consumer behavior changes or management changes. Change can cause what was once a great investment for our portfolio to possibly be not as good. Since things can change it does require us to monitor our portfolio at times. So a benefit is that you don’t have to constantly be watching your portfolio day in and day out but I would not recommend a buy and completely forget approach either.
How Often Should I Monitor My Stock Holdings?
Ask that question to 5 different dividend growth investors and I imagine you will probably get 5 different answers. Some say you need to monitor monthly while others might say review your portfolio once a year. Here at Dividend Growth Stock Investing, I believe you should do a quarterly portfolio review. I plan my reviews for April, July, October and January after the completion of each calendar quarter. Now I’m not going to sit here and say I never look at my portfolio outside my plan reviews. I typically look at my portfolio daily and definitely weekly but this is more because I love stock investing rather than because I must be monitoring. I believe if you monitor once a quarter you will be doing fine.
What Do I Keep Track of When Reviewing My Portfolio?
There are a few things I like to look at when I do my quarterly dividend growth stock portfolio reviews. I monitor income earned by the total portfolio, income paid by the individual companies and do a review of the individual companies I own. You might also want to keep track of portfolio diversification and weighting of individual companies in your portfolio
The first and in my opinion most important metric to keep track of is the total income earned by your portfolio. I keep an Excel spreadsheet where I keep track of each quarter’s income. I want to make sure that my dividend income earned this previous quarter is higher compared to the dividend income earned in the same quarter one year ago. If this amount has gone down then I need to figure out why. Possibly a company decreased their dividend rate which will signal a sell for that stock. Another reason quarterly income could decrease is if I made a sell throughout the year and kept the proceeds in cash or investing in a stock with a lower dividend yield. Either way I want to make sure I understand what is happening with my income since this is my most important part of my portfolio as a dividend growth investor.
Next I review the previous 6 quarterly dividend payments made by each company I own. I want to make sure each company I own is increasing their dividend rates annually. When reviewing their previous dividend payments I should see that the rate has been increased at least once. Otherwise I will possibly want to review the company and think about making a change. As dividend growth investors we want the dividend rate to be growing. Our goal is an income that will be able to meet our financial needs while growing to keep pace or outpace inflation. Companies that aren’t annually increasing their dividends aren’t a good match for a portfolio with this goal.
I also like to review the individual companies I own each quarter. I look for any good or bad news that has come out in the last quarter about the company. I keep a file on each security I own since the day I bought it and will add anything I believe to be significant to that file. I also like to monitor the fundamentals of the company and the current valuation of the company. Is the company continuing to grow earnings? Is the company valued too high where I may want to think about selling or is the company undervalued where I may want to add to my position? On an annual basis I will do a more extensive review of each company to make sure the annual reported earnings numbers are growing, dividends are growing, debt levels are good, etc.
One last thing you may want to monitor with your dividend stock portfolio is the diversification and weighting of individual companies making up the portfolio. To help decrease risk of our investing portfolio it is important to have some diversification and to make sure that one or two stock holdings aren’t making up the majority of your portfolio. I typically review this when making new purchase decisions and try to keep the portfolio in balance with those new purchases. However there could be a big price movement during a quarter causing the portfolio to become significantly unbalanced which you may want to address. Since I don’t like to sell for this reason, I will try to solve the situation through new future purchases.
Conclusion
As a dividend growth stock investor you don’t need to be constantly watching your portfolio. This is one of the big reasons dividend growth stock investing is a perfect strategy for many investors who don’t have the time or interest of constantly watching their investments. I recommend reviewing your portfolio at least quarterly while others believe you can even get away with checking things out once a year.
