Despite the news…, November 2021

Source: Pixabay

This is an update on my portfolio for the month of November. Despite the news of the latest pronouncements on the pandemic stock markets only dipped slightly last month, whilst my portfolio was buoyed by record dividend receipts.

November

The FTSE All Share Total Return index, my chosen benchmark, was down by -2.24% in the month, but is up by +13.04% for the year to date. My investment return for the month was a loss of only -0.09%, but I have a gain of +9.66% for the year to date. My individual holdings recorded share price movements for the year so far ranging from a loss of -11.03% to a gain of +42.08% with an unweighted average result of a gain of +8.04%.

The underperformance arises mostly from lower returns on my non-UK holdings in the Asia Pacific and global equity income sectors where the unweighted average gain was +2.17%. Returns from my UK holdings have, however, been mixed with only half of them ahead of the index. My UK holdings had share price movements ranging from +0.91% to +20.13% with an unweighted average of 9.23%. Adding dividend income to these capital returns suggests that my UK returns are slightly ahead of the index. My best individual return is from the commercial property real estate investment trust that I switched into in February 2021.

Capital

Starting from an index value of 100.00 at 31 December 2013, my capital is now 135.20, as shown in the graph above. This is below August’s peak of 138.67. It is up by +6.42% since the end of the 2020 year. Investment returns, growth (+4.13%) and income (+5.38%), added +9.51%, and draw down expenditure deducted -3.09% during the eleven months of the year to date.

Income

Annual dividend income as a percentage of the opening portfolio value on 31 December 2013 has increased from 3.37% to reach 6.75% at this month end, as shown in the graph above. This is a new peak and is a doubling of the starting income nearly eight years ago. The increase in the month mostly arose from dividends received being reinvested in more shares. There were three small dividend increases announced and one dividend was reduced. The reduction was made to a special dividend paid by one of my new small company growth trusts. This is a small holding so the income impact was minor. Portfolio income has increased by 4.27% in the year to date. The value of dividends received in the month was also a new high and was over 1% of the portfolio value. My dividends are mostly paid every quarter and 75% are paid in the four months of February, May, August and November. All dividends have now been declared for 2021 for my holdings so I know that there will be no dividends paid in December.

Investment changes

Dividends were re-invested in the month but no other trades were made. In early December I sold part of an “income” holding in order to add to a “growth” holding. This is part of my gradual switch towards growth.

Portfolio

The table below shows the composition of my portfolio at the end of the month. This has been analysed by the sector of each holding.

 Yield %Capital %Income %
UK4.1740.2233.62
Asia Pacific5.1522.7923.54
Global4.5718.6517.07
Bonds8.228.1313.38
Property7.218.5412.33
Cash0.191.680.06
4.99100.00100.00

I have also analysed by the income or growth category of each holding.

 Yield %Sectors
High Incomeabove 5%UK, Property, Bonds, Asia Pacific
Income4% to 5%UK, Global, Asia Pacific
Income & Growth3% to 4%Global
Growthbelow 3%UK, Asia Pacific

 Yield %Capital %Income %
High Income6.6243.1257.25
Income4.5736.8933.81
Income & Growth3.826.565.02
Growth1.6411.753.86
Cash0.191.680.06
4.99100.00100.00

This allocation has changed since last month as some holdings have slipped into the higher income categories because their share price fell.

Cash

My annual drawdown spending is now around 3.34% of my portfolio value, based on the last two years spending and the opening and closing values for that period. My cash holdings are sufficient to cover about six months of spending. In addition, dividends being paid out in cash each year from my dealing account are sufficient to cover about four months of spending. Most of my dividends are being reinvested in my tax-sheltered accounts. I last sold shares from my dealing account to raise cash in early September. I will need to do that again in the next few months.

Expenditure

Draw down spending was 65.74% of my portfolio income in the year to 30 November 2021 which was an increase from 59.02% for the year to 30 November 2020. Portfolio income rose by 5.28% and expenditure rose by 17.27%. Expenditure in the month of November was less than 1% higher than last November which gives some limited reassurance that the apparently upward trend is not inexorable.

Higher unavoidable spending on energy costs, council taxes, and groceries look to me to be certain, probable, and possible respectively. Other higher spending may be avoidable or at least a discretionary choice. We have certainly made some discretionary choices to spend more in the last year on things for the home. We have also had some exceptional costs for car repairs and Capital Gains Tax.

The inflation indices are continuing to rise with the retail price index (RPI) now at an annual rate of 7.1% and the consumer price inflation index (CPI) now at an annual rate of 5.1%. This gives me concern for our future expenditure but also for the future of markets and our investments.

Conclusion

The latest pronouncements on the pandemic look to have only caused a small dip in the UK stock market at the end of November which was then mostly reversed. Perhaps more importantly for my portfolio the pace of dividends being paid and re-invested continued unabated. I’m now considering when next to continue my switch to growth and when next to raise more cash. I will aim to take these steps whilst sustaining my dividend income at the levels achieved in 2021.

5 Replies to “Despite the news…, November 2021”

  1. Please note the inflation rates you quote are 12 month rates – and not annual rates. Annual rates would currently be lower as the respective 12 month rates at the start of this year were 1.4% and 0.7%. However, annual rates look bound to rise too – albeit with a lag.

    • The value I refer to can only really be calculated once the year is over, see e.g:
      https://www.statista.com/statistics/270384/inflation-rate-in-the-united-kingdom/
      It is essentially the average (of the 12 month inflation rates) across the calendar year in question. For 2021 to date, this is around 3.7% for RPI and 2.3% for CPI.

      One of the challenges with inflation indexation is what precise value to use and when to apply it. For example, DB pension schemes often use the September 12 month value but wait until April of the next year to apply it. NS&I ILSC’s use values ideally related to when the a/c was opened, but ultimately have to use values that will be available at maturity. HMG uses various indexes and dates for taxes and benefits, Gilts ….
      There is always some form of delay before indexation is applied as the measurement of inflation is, by definition, retrospective.

  2. Thanks for explaining that. This average of the 12 month inflation rates during the year could be useful for a comparison of annual expenditure changes.

    • No worries.
      Inflation is a monthly retrospective measure (c.f. prices 12 months ago) that is compensated/allowed for annually – often with a significant delay too.

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