Monday, September 16, 2013

Snowball Portfolio

“'Life is like a snowball. The important thing is finding wet snow and a really long hill.” – Warren Buffett

The purpose of this portfolio is to protect capital, identify growing dividends, and provide long running income streams.

Portfolio Selection & Goals
This portfolio looks for companies with the following characteristics:

* Margin of Safety - companies should exhibit a durable competitive advantage to protect the company's cash flows and the ability to payout dividends

* Yield - A higher than average dividend yield. Generally only interested in the companies with the ability to pay at least 50% more than the current S&P 500 yield

* Low payout ratio - stocks should payout a low percentage (generally less than 60%) of their overall profits as dividends. This is to protect the dividend in the event of downturns.

* Dividend growth - stocks selected for this portfolio should be able to support a dividend growth rate that combined with their current yield exceeds 10 percentage points. For example, a stock paying 3.5% dividend yield should be able to grow its dividend by at least 6.5% or more each year

The primary metrics that I use to measure the performance of the Snowball Portfolio are as follows:

  •  Total Return: the combined return of the stocks’ capital gains plus the dividend income received 
  •  Current Yield: the “look through” yield of the portfolio as a whole
  •  Dividend Raises and Cuts: tracking the total number of the Portfolio companies’ dividend raises and cuts over time

Current portfolio metrics


  1. Your payout ratio less than 60% will prevent you from investing to REITs and MLPs or are you adjusting for those companies?

  2. @Martin- yes, REITs and MLPs are still worth owning in my opinion, and they do require adjustment.