My portfolio capital and my portfolio income continued to be stable and relatively unchanged in the year 2022 to date and in the month of May. Things have, however, changed a bit since then as regards capital values.
May
The FTSE All Share Total Return index, my chosen benchmark, was up by +2.33% in the month, and up by +1.50% for the year so far. My investment return for the month was a gain of +0.22%, and a gain of +1.43% for the year so far. My individual holdings recorded share price movements for the year so far ranging from a loss of -29.75% by a UK small company investment trust, to a gain of +14.01% by a commercial property REIT, with an unweighted average result of a loss of -3.88%.
Capital
Starting from an index value of 100.00 at 31 December 2013, my capital is now 140.58, as shown in the graph above. This is another slight fall from March’s new peak. There has been an increase of +0.28% in the year to date. Investment return of a capital loss of -1.04% and dividend income of +2.47%, totalled an investment return of +1.43%. Draw down expenditure deducted -1.15% during the year so far.
Income
Annual dividend income as a percentage of the opening portfolio value on 31 December 2013 has increased from 3.37% to reach 6.79% at this month end, as shown in the graph above. This is a new peak. My current portfolio dividend income yield is 4.83%, i.e., 6.79 divided by 140.58.
Investment changes
Following a burst of activity in the first week of April as I raised cash for regular spending and for reinvesting in my ISA, and realised some capital gains, things have gone quiet again. The only activity during the month of May was that some dividends were received and re-invested in my tax-sheltered accounts and some dividends were received and paid out from my dealing account. These dividends amounted to about 1% of my capital and this was my second highest monthly pay-out of dividends. This reinvestment has pushed portfolio income to a new peak. This gives me a little scope to reposition the portfolio towards lower dividend holdings or else to raise a little more cash without reducing my portfolio income too much.
Portfolio
The table below shows the composition of my portfolio at the end of the month.
| Yield % | Capital % | Income % | |
|---|---|---|---|
| UK | 3.99 | 38.05 | 31.43 |
| Asia Pacific | 5.02 | 24.76 | 25.75 |
| Global | 4.05 | 18.93 | 15.87 |
| Property | 7.06 | 8.76 | 12.80 |
| Bonds | 8.34 | 8.13 | 14.04 |
| Cash | 0.38 | 1.36 | 0.11 |
| 4.83 | 100.00 | 100.00 |
The portfolio is now much more diversified than it used to be. The traditional UK equity income “dividend heroes,” actual and aspiring, make up only 28% of the portfolio now. Asia Pacific equity income is 21%, and global equity income is 19%. High yielding bonds and property accounts for 17%, and low yielding growth holdings, in UK and the Asia Pacific, amount to 14%. (Should I now add more to these growth holdings or should I build back up my UK equity income holdings?)
I also analyse the portfolio by the income or growth category of each holding as follows:
| Yield % | Sectors included | |
|---|---|---|
| High Income | above 5% | Bonds, Property, Asia Pacific |
| Income | 4% to 5% | UK, Global, Asia Pacific |
| Income & Growth | 3% to 4% | Global, Asia Pacific |
| Growth | below 3% | UK, Asia Pacific |
My recent switches mean that I no longer have any UK holdings in the high-income category.
| Yield % | Capital % | Income % | |
|---|---|---|---|
| High Income | 7.76 | 24.22 | 38.93 |
| Income | 4.54 | 46.91 | 44.11 |
| Income & Growth | 3.86 | 13.71 | 10.96 |
| Growth | 2.06 | 13.81 | 5.89 |
| Cash | 0.38 | 1.36 | 0.11 |
| 4.83 | 100.00 | 100.00 |
Cash
My annual drawdown spending is now around 3.39% of my portfolio value, based on the last two years spending and the opening and closing values for that period. That’s an increase from last month but still consistent with recent months. My cash holdings are now sufficient to cover about five 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. I will need to sell some shares to raise cash again but not for several months.
Expenditure
Draw down spending was 63.41% of my portfolio income in the last twelve months which is higher than the figure of 59.44% for the previous twelve months. Portfolio income rose by 0.21% and expenditure rose by 6.90%.
May was our highest spending month since December 2020. We had additional to normal spending on home improvements, a new laptop computer, a summer holiday booking, and some capital gains tax. We also had our biggest ever monthly spend on energy. It was about double what we paid just about one year ago.
RPI and CPI inflation reached annual rates of 11.13% and 8.99% at the end of April. My impression is that this has not yet impacted on our grocery spend. With about 60% of our spending being on discretionary or luxury items I still believe we can make some choices to avoid the full impact of such double-digit inflation on our total spend.
Two weeks of June
At the time of writing this, my portfolio has dropped by about 3.5% in June. That is a reduction of over -3% in the 2022 year to date. That drop in June will include a little June spending but is mostly the result of the market downturn in recent days. I estimate that the year-to-date total return on my growth holdings is a loss of around -20%. I expect that a loss of around -20% is the total result for other investors targeting only growth. (Should I switch to add to my growth holdings at these reduced prices or should I hold fire for now because they will continue to fall?) Most of my other portfolio segments are showing around a -1% loss, except global income which I estimate is in positive territory at +6%.
Conclusion
Based on recent months this mid-month turbulence may have subsided by the end of June, but alternatively it could worsen. I will likely sit tight with my current portfolio and consider my next moves at my leisure. My portfolio income is at a new peak and dividends continue to be maintained or increased slightly. I have experienced no dividend cuts since one commercial property holding cut its dividend in 2020. In addition, I am effectively able to reinvest over one-third of my portfolio income in more dividend paying shares. I can therefore afford to sit tight and see how this market storm plays out.