ADrunkenMarcus' 'Dividend Growth Portfolio'.

[ADrunkenMarcus]

Diploma announced yet another acquisition which looks, at first glance, very positive and earnings accretive from the start.

It was my best performing holding in the past year and up over 37% on a total return basis. Since my portfolio was unitised at 30 April 2016, Diploma has returned 3.5x the growth of the FTSE All World (I only wish it had accounted for a higher proportion of my portfolio!). I’m glad it stands at 8.5 percent of my portfolio today but I’d be happy to double that!

Best wishes


Mark

[EmperorZog]

The one that’s on my watchlist is 4imprint (four) which always seems like a share I should buy but always seems too pricey so I never take the plunge.

Regards
Dave

[ADrunkenMarcus]

The one that’s on my watchlist is 4imprint (four) which always seems like a share I should buy but always seems too pricey so I never take the plunge.

I have a few like that! Eyeballing it on SharePad, the forward p/e looks like it's a shade under 20 for the coming year. Not too bad and significantly less than previously. I know little about the company, though.

Diploma...was my best performing holding in the past year and up over 37% on a total return basis. ... I’m glad it stands at 8.5 percent of my portfolio today but I’d be happy to double that!

My comment on Diploma needs updating. It uprated guidance for the year again today and, at one point, the shares seem to have hit 4340p. It closed up 'only' 5 percent. These gains have taken it to 9.4 percent of the portfolio. This company has been repeatedly outperforming consensus in recent years.

Best wishes


Mark.

[EmperorZog]

So I stopped my dithering and bought into 4imprint. Apologies in advance as no doubt the sp will now collapse!!

[kempiejon]

So I stopped my dithering and bought into 4imprint. Apologies in advance as no doubt the sp will now collapse!!

I've often been attracted by the numbers at 4imprint, been looking at them for ages too. Always a bit dear. If you've be good enough to drive the price down I might join in so expect more of the same.

[ADrunkenMarcus]

My review for 2023-24 (1 May 2023 to 30 April 2024).

TRADES

As noted above, Reckitt Benckiser was sold and Evolution and DP Poland topped up. The portfolio was expanded significantly during the year with new capital, which was used to top up Mastercard, Blackrock Smaller Companies and Diploma.


CURRENT HOLDINGS (% of PORTFOLIO)



Since 30 April 2024, Diploma and Blackrock Smaller Companies have performed well. Diploma topped 9.7 per cent of the portfolio and Blackrock Smaller Companies hit 10.4 per cent.


TOTAL RETURN – INDEX



The prior year was more pleasing, when the portfolio did much to close the gap which opened up with the FTSE All World ($) during 2020-21. This year was relatively disappointing even though the return was positive. The portfolio has a bias to UK and UK small cap equities, which did not help at all. Although this shows the vanity an investor has when trying to compare themselves with the world market, I believe that the underlying dividend stream will be more resilient during tough times. The portfolio may end up being more concentrated and with a tracker element in future, but that can cause complications if ETFs are held outside a tax wrapper.

Diploma is really the case study of an ideal holding. Since purchase in November 2012, the capital gain is 821 per cent (over 20 per cent CAGR) and the dividend has grown over 13 per cent a year leading to a 12 per cent nominal dividend yield on cost. It has returned almost three quarters of the original book cost in cash dividends paid, alone. Total return (capital gain plus dividends paid per share not reinvested) is almost 900 per cent. Hindsight is a wonderful thing and my original position was far too small, but I topped up in 2018 and again heavily in 2024. Today it stands at 9.7 per cent of the portfolio and so if it attains anything like its historic performance over the next decade then it will be very pleasing.


TOTAL RETURN – INDIVIDUAL HOLDINGS

Diploma led the way with a return of 37.49 per cent, followed by Mastercard, Renishaw, Bioventix and DP Poland. (It is worthwhile noting that Diploma has already added a significant gain since 30 April 2024 on top of that. That gain is so significant that I would be happy with it for an entire year’s performance.)



INCOME:

The ordinary dividend income per unit came to 3.07 pence with no special dividends. As noted previously, this shows a slight decline compared to the prior year, however this is solely due to two factors: Evolution moved its dividend payment (it pays the entire year in one go) from April to May, moving it to the next year so that it is not counted in 2023-24; and the substantial amount of additional new capital, which was invested in holdings which did not pay a dividend between purchase and the end of the year.

Adjusting for these factors, underlying dividend income grew moderately and this included Evolution raising its dividend very substantially.

I wrote previously about the dilution of the dividend per unit figure by the increased size of the portfolio and that new capital going into very low dividend yielders. This has been true since inception and so the absolute level of dividends received has grown very significantly even as the dividend per unit was substantially diluted. The portfolio today (measured by income unit numbers) is about 30 per cent larger than at inception and, as well as new capital going into low yielders, some of the original sum invested has been moved across to companies with a lower yield but higher dividend growth.

To date, the portfolio has returned 25.76 per cent of the capital invested in dividends (ordinary and specials).

No holdings cut their dividend. Dividend changes per share were as follows (uses tax year data, actual dividends received in Sterling):



The Domino’s Pizza Group dividend did not grow to the extent shown (again, dividend timing changes were the issue). However, Evolution did! Kone maintained its dividend in Euros and AstraZeneca’s dividend was affected by exchange rates: neither cut their dividend.

Again, the stronger growers typically have a lower current dividend yield and make up for a relatively small proportion of the portfolio dividends, so this strong growth is not reflected very well at a portfolio level (i.e. Diploma and MasterCard). Murray International and Unilever account for about 50 per cent of dividend income combined together. Therefore the increased rate of dividend growth from Murray International (up to 5.4 per cent) should benefit the portfolio in 2024-25, but Unilever has continued its dividend freeze.

To date, about 54 per cent of returns came from capital appreciation and 46 per cent from dividends. I would prefer a longer term balance of closer to two-thirds coming from capital and one third from dividends.

RUNNING COSTS

The running costs, based on the portfolio’s capital value at the end of the period, were: annual cost (inc dealing) 0.29% and annual cost (ex dealing) 0.19%. Dealing costs were higher due to the new capital being invested.

As I said last year: ‘What will the next year bring? Who knows.’

Best wishes


Mark.

[flyer61]

Well done Mark, great to see.

I sold Kone some time ago and cycled into OTIS. Also sold out of Diageo at £37 and cycled into LTI. Not sure whether that was a good idea.
MYI remains a core holding for income and hopefully growth. Would be happy to buy more at the present price.

MSFT, PM and PEP remain my biggest individual equity holdings....no getting away from Terry Smith!

[Regdragon]

Great work Mark. The “Dividend Growth Portfolio” is such a solid contribution to the Lemon Fool’s Investment pages. I wonder whether, in the event of another pullback - as it’s very pricey now - Judges Scientific might be worth a look. Their management focus on Shareholder Value and they target 10% annual dividend growth (which they often beat.) They paid a £2 Special Dividend in 2019 and then went on to double the regular dividend between 2019 and 2023 - very impressive. Their business model is similar to Diploma’s in that they look to acquire niche, earnings-accretive companies at no more than 7x EBIT. And they are still only capitalised at £763M so it might be one for the Watchlist.


https://www.fidelity.co.uk/factsheet-da ... /dividends

Regards,

RD